Dissolving an LLC in Florida
When starting a new LLC, there is typically optimism that the business will be successful and that the members will get along well. In reality, however, things happen over time and disputes may arise between members in an LLC. In these cases, there is a some chance the LLC will be headed to what is called “dissolution.” Dissolution is the formal legal process of dissolving, or ending, the LLC. If you’re considering dissolving an LLC with more than one member, it best to retain a skilled Florida business litigation attorney who will make sure all formalities are properly handled, to protect the members from liability to outside creditors and to each other .
Reasons LLCs may Voluntarily Dissolve
There are a number of reasons that LLCs or certain members may want the LLC to be dissolved. One of the most common reasons is due to a lack of funding for past debts or future operations Many small and large businesses fail and expenses may outweigh incoming revenues. In this situation, members may no longer be able or willing to continue the LLC’s business operations and are looking for an exit strategy.
Another reason for dissolution of an LLC is internal issues within the business. These issues may be disagreements between certain members of the LLC or between managers and members of the LLC. Examples of disagreements are the method of business management, the direction of the company, decreasing sales, problem employees, and many other reasons.
Personal matters within members’ or managers’ lives can also trigger issues. A death in the family, sudden serious illness, or personal bankruptcy may prevent or limit a member or manager’s participation in the business.
Dissolving an LLC
In Florida, an LLC can apply for a voluntary dissolution by filing Articles of Dissolution with the Florida Division of Corporations, provided it meets the statute’s requirements. There are a number of provisions that must be met. Some of these requirements include stating why the LLC is being dissolvedand its effective date of dissolution.
Under this method, members must verify all debts and outstanding liabilities have been resolved, or will be resolved, and confirm there is no pending litigation against the LLC. If there is pending litigation, the Articles of Dissolution must include a provision on how a potential judgment will be satisfied.
Once the Division of Corporations dissolves an LLC, the LLC must cease operations as a business, except to wrap up any outstanding affairs that remain. Some of the final tasks might include things like taking care of final liabilities, giving notice to everyone who legally needs to be notified, distributing assets to creditors, and distributing whatever assets remain to designated members.
LLC Dissolutions and Formal Operating Agreements
Most LLC operating agreements will have a dissolution clause in that sets the procedure for dissolution. Most operating agreements will set a percentage of the members that must vote to to dissolve an LLC by consent, or in the absence of an operating agreement, the LLC statute sets certain procedures to achieve dissolution voluntarily, administratively or judicially. See Fla. Stat. §§ 605.701-.714.
With changes in Florida’s Revised LLC Act as of 2015, it’s best to retain a knowledgeable Florida LLC lawyer who is abreast of the most current laws and is experienced in resolving LLC member disputes. Contact our team of business law attorneys at McCabe Rabin, P.A. to schedule a consultation.