What is a Judicial Dissolution?
There are a few reasons why an LLC, or limited liability company, may be dissolved. One of
these is judicial dissolution, where a judge dissolves a company for its failure to comply with
certain laws. This could follow from a company’s failure to pay its taxes or its failure to follow
the laws of the state where it is incorporated. However, a dissolution may also result from a
lawsuit, such as when one member of the LLC decides to sue another member and end their
business obligations to one another.
After dissolving the LLC, the final step is liquidation of the LLC’s assets. The process of
liquidation refers to the complete sale of the LLC’s assets, typically to creditors or shareholders.
However, there are alternative options to dissolving an LLC and liquidating its assets, which may
be helpful to keep in mind.
Election to Purchase in Florida
In Florida, there is the option to elect to purchase shares of an LLC instead of dissolving the
LLC, governed by Florida Statute § 605.0706. Under § 605.0706(1), one or more members of an
LLC may elect to purchase the shares of the petitioning member–in other words, the member
petitioning for dissolution of the LLC–at the fair value of the shares.
Under section two of this provision, § 605.0706(2), an election to purchase the petitioning
member’s shares “may be filed with the court within 90 days after the filing of the petition by the
petitioning member,” or at a later time if the court permits. If one or more LLC members file an
election to purchase, the LLC is required to provide notice in writing to the other members (but
not the original member petitioning for dissolution) within ten days. The written notice must be
specific, as it must state and describe “the interest in the company owned by each petitioning
member,” and must also advise each recipient “of their right to join in the election to purchase
the petitioning member’s interest.” In other words, the written notice must inform every member
of their right to elect to purchase shares, should they wish to do so.
Once an election to purchase is filed with the court, that decision is irrevocable, meaning it
cannot be taken back or modified. However, exceptions apply if the court finds that any change
or revocation would be fair under the circumstances, such as whether it would be fair to change
or set aside the election to purchase.
It can be difficult to fully understand the statutes and exceptions for electing to purchase in
Florida, so it is recommended to speak with an attorney concerning any questions regarding
electing to purchase shares, or regarding LLCs in general.
