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LLC Litigation, Involuntary Dissolution

Although corporations and limited liability companies (“LLC”) have many similar legal characteristics, they do have some dissimilarities when it comes to litigation. Both corporations and LLCs may be involuntarily dissolved by the Missouri attorney general or shareholders or LLC members. There is a clear difference , however, in when a shareholder may move to dissolve a corporation versus when a member may move to dissolve a LLC. The standards are different. 

For many corporations, a shareholder may file a lawsuit to dissolve the corporation if it is established that (a) there is a gridlock in the management of the corporation or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders because of the gridlock; (b) the directors or those in control are acting illegally, oppressively or fraudulently; (c) the shareholders are deadlocked in voting power for at least two (2) consecutive annual meetings; or (d) corporate assets are being misapplied or wasted. Section 351.494, RSMo. 

The standard is different with a LLC. A member may seek to involuntarily dissolve a LLC when it is “not reasonably practicable to carry on the business in conformity with the operating agreement.” Section 347.143, RSMo. An LLC’s operating agreements is essentially its internal rules regarding the operation of the company. It my contain any provision, not inconsistent with law, relating to the conduct of the business and affairs of the LLC, its rights and powers, and the rights, powers and duties of its members, managers, agents or employees. Section 347.008, RSMo. As of this writing, no Missouri cases have apparently discussed when it is no longer “reasonably practicable” to carry on business in conformity with the operating agreement. Courts have yet to determine whether it can be something simple such as personal differences between the parties or something more such as oppressive conduct (as with corporations). 

Contact with business litigation questions, or inquiries relating to LLCs and/or corporations.