Reasons for Voluntary Dissolution of LLC

by Anna Assad

A limited liability company, or LLC, is legally formed once the initial articles of organization are filed by the organizing members with the state business department. The business continues to exist unless voluntarily dissolved by the actions of its members, or is involuntarily dissolved by judicial order or another event as dictated under state laws.

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An LLC may voluntarily dissolve if the business venture has failed. If operating expenses consistently outweigh profits, the members may not be able to afford to continue operating the business at a loss, as the LLC was founded on contributions from the organizing members. Not all members may wish to dissolve; however, depending on the articles of organization and bylaws of the LLC and the state laws where the LLC is headquartered, a unanimous vote for dissolution may not be required.

Problems With Members

The LLC members may agree to dissolve the business due to internal problems, such as disagreements among members about the business management, operation and direction. Personal matters experienced by one or more members, like a death of an immediate family member, bankruptcy, financial disaster or medical illness, may make operating the LLC difficult if the affected members performed key business functions.

Triggering Event

A dissolution event stated in the initial articles of organization qualifies as a voluntary dissolution in some states. Dissolution events are happenings that the articles stipulate will end the LLC upon occurrence, such as the death of an organizer, loss of a particular asset or a vote. Normally, the death of a member will not trigger the dissolution of an LLC if other members still remain, but the initial articles of organization may include the provision.

Stagnant Business Growth

An LLC may be voluntarily dissolved if the members feel that the company is not growing, expanding or performing the service for which it was originally intended. The business may be making a profit, but members are generally required to be active in the management, a task that may be difficult if the members feel the company is not moving forward or cannot achieve total success.