Can I Dissolve an LLC in Maryland if My Business Partner Refuses?

In the course of business, disputes may arise that affect the state of the company which are critical to resolve. One example of this might be where one member of an LLC wants to dissolve the entity, but other members disagree.

Barring any specific provisions in the organizing documents of the LLC, Maryland law only allows dissolution if the members are unanimous. If there is disagreement among the members, however, you still may have the ability to petition a court to order the dissolution of the LLC.

You should not have to take on these complex and substantial issues without help. To discuss your options during a free initial case evaluation with our seasoned Baltimore business attorneys, call the Heyman Law Firm today at our offices at (410) 305-9287.

Process of Closing an LLC in Maryland

If you want to close down your LLC that is registered in the State of Maryland, there are a number of different hoops that you must jump through. Closing an LLC requires two different filings that are often lumped together improperly: dissolution and cancellation.

Some LLCs have specific terms in their organizing documents that indicate when, why, and how dissolution should occur. It is not required under Maryland law to feature this language in organizing documents, but having these terms can help avoid potential disputes between LLC members on dissolution. If your LLC’s documents do not feature clauses on dissolution circumstances, you should reach out to a Maryland business attorney for assistance in amending these documents to make your situation as clear as possible.

Can You Dissolve an LLC if Your Partners Disagree?

If the organizing documents do not feature language about dissolution circumstances, or if the language that does exist is not specific or applicable to the situation, Maryland state law provides its own form of guidance. In Maryland, an LLC can only be dissolved in three ways:

• All members of the LLC unanimously vote to dissolve
• The LLC has no members for at least 90 consecutive days
• A court orders judicial dissolution of the LLC

In other words, if the LLC has multiple members and at least one member refuses to vote to dissolve, the only way that dissolution can happen is if the formation documents feature specific provisions that apply to force dissolution or if a court orders dissolution.

Seeking Judicial Dissolution in Maryland When Partners Refuse to Dissolve

Judicial dissolution, also referred to as involuntary dissolution or the “corporate death penalty,” does not happen often. In these situations, a court may force a corporation to shutter without needing the unanimous approval of the members.

To obtain a judicial dissolution, a petition must be filed in a Maryland court. The petition must contain reasoning for the dissolution, and this reasoning will determine who can file the petition, according to Maryland corporate law.

Inability to Meet Debts

Any stockholder or creditor can petition for dissolution of a corporation on the grounds that the corporation is unable to meet its debts.

Gridlock

Any stockholder with voting power can petition a court to dissolve the corporation, provided one of the following situations exists:

• The stockholders are so divided on electing directors that they have failed for at least two annual meeting dates to elect successors to current directors
• There is so much internal dissension among stockholders that the business and affairs of the corporation cannot be conducted to the advantage of the stockholders
• The acts of directors or the corporation as a whole are illegal, oppressive, or fraudulent

Any stockholder with at least 25% voting power in the election of directors may provide the following reasoning for a petition for judicial dissolution:

• The directors are so divided regarding management of the actual affairs of the corporation that votes required from the board to act cannot be obtained
• The stockholders are so divided that directors cannot be elected

Delayed Transfer of Stock

Stockholders can also petition for judicial dissolution if they have made a written request for consent to a valid transfer or sale of stock and this request was rejected or otherwise not answered within 30 days of making the request. To be valid cause for judicial dissolution, the request for consent to transfer or sale needs to be valid under Maryland law and the language of the corporation’s organizing documents.

To summarize, a successful petition for judicial dissolution will require either that the corporation itself is engaging in illegal or fraudulent behavior, or that executive decision-makers within the corporation are so far apart on issues that it is harming the entity and its members.

How a Maryland Business Attorney Can Help You in Your Dissolution Dispute

If you have reached the point where only dissolution of your LLC will serve your interests, the stakes are high and every decision that you make is important. Rather than trying to take on Maryland corporate law alone, you are much better off working with a seasoned Maryland business attorney.

Your lawyer can use their experience navigating business disputes to try to find a solution to your situation that avoids having to go to court. If the time and money costs of a legal case can be avoided, you should explore all possible avenues to resolution, including some that your lawyer may provide of which you may not have been aware.

While you are not required to obtain legal representation for a petition for judicial dissolution, success rates are substantially higher for those who take this step. Lawyers who are already familiar with local procedural rules and introducing evidence can save you time and ensure that your full case is heard.

Contact the Heyman Law Firm for Free to Get Dissolution Help Today

To learn more about your options regarding your LLC, call the Heyman Law Firm today at (410) 305-9287 and you can get your first case evaluation free of charge.