Judicial Dissolution of a Business
You start a company with one or more individuals and register this company with the Florida Department of State, Division of Corporations (www.sunbiz.org) so that you can commence business operations. You are excited! This is a brand-new business venture, and you are filled with hopes and dreams that your new venture will be prosperous and long-lasting, including the relationships you have formed with the other owners of said business.
Unfortunately, all good things must come to an end, including your business. In Florida, there is a process a business must undergo to unwind its affairs, pay off its liabilities and then distribute its assets to the owners of that business. This process is called a “judicial dissolution,” otherwise known as a “business divorce.” Just like a divorce between a husband and wife, a judicial dissolution of a business brings with it a lot of hurt feelings and often animosity between the owners. For this reason, it is critical that you hire an attorney who is Board Certified by the Florida Bar in Business Litigation to serve as an intermediary between you, the other owners and their counsel. You do not want to unknowingly waive any rights you may have.
The process for judicial dissolution is set forth in Florida Statutes (https://www.flsenate.gov/Laws/Statutes). However, for ease of reference, here are the applicable statutory provisions for each type of business entity:
- Limited Liability Companies (LLCs): Florida Revised Limited Liability Company Act – sections 605.0701-605.0713, Fla. Stat. (2021);
- Corporations: Florida Business Corporation Act – sections 607.1401-607.1405, Fla. Stat. (2021); and
- Florida Revised Uniform Limited Partnership Act of 2005 – sections 620.1802-620.1807, Fla. Stat. (2021); or
- Revised Uniform Partnership Act – sections 620.8801-620.8807, Fla. Stat. (2021).
As an individual, due to the complexity of Florida law, you are protected when you hire an expert in the field, a Business Litigation Board Certified Attorney. The process is quite seamless if done properly. First, it requires the filing of a Complaint in Circuit Court to initiate the judicial dissolution. Then, both the business entity and the other owners must obtain their own attorneys to represent their interests. Promptly after the initiation of the case, the petitioner’s attorney will file a Motion with the Court to request that either a custodian or a receiver be appointed to oversee the wind-down of the company, in the process paying off all liabilities and then determining the proper and equitable distributions to each owner based on their proportionate ownership of the business. While this process can be contentious, it does not need to be. The owners, by and through their attorneys, can amicably, professionally and collaboratively agree upon a proper custodian or receiver. If the parties cannot agree, however, the Court will appoint a person whom the Judge finds is well qualified to serve in that capacity.
WORD OF CAUTION: Most owners of small to medium-sized businesses in Florida also work for the business entity. In dividing the tasks of the business based upon skillset, it very well could be that the owners working in the field do not have any clear idea of how well the business is performing because the owner who manages the office is not forthcoming with this necessary information. Sadly, too often, these persons try to buy out the interests of the owners who work in the field so that they can replace them with cheaper labor with no ownership interest in the thriving company, thereby enhancing their profit margin in the process. Therefore, it is essential that, when you are offered a buy-out by another owner of the business, you consult with an expert immediately, to wit: a Business Litigation Board Certified Attorney. At Lannon Land Litigation Local Law, we are happy to provide you with a free consultation in order to protect you and your ownership interest in the business.