Can One Partner Dissolve an LLC in California? Legal Rights and Limitations Explained

When business relationships deteriorate or strategic directions diverge, LLC members (often informally called “partners”) may find themselves contemplating dissolution. A common question we hear at TONG LAW is whether a single member has the authority to dissolve a multi-member LLC in California. The answer is no—a single member cannot unilaterally dissolve a multi-member LLC—but there may be alternative legal options available.

How LLC Dissolution Works in California

Dissolution is the formal process of terminating a limited liability company’s existence. In California, this process is governed by the California Revised Uniform Limited Liability Company Act (RULLCA), specifically Corporations Code sections 17701.01 through 17713.13.

Unlike some business entities, LLCs offer considerable flexibility in their governance structure, which extends to the dissolution process. Whether one partner can unilaterally dissolve an LLC depends primarily on the provisions in your operating agreement and applicable state law.

The Operating Agreement: Your First Source of Authority

The operating agreement serves as the primary governing document for your LLC and typically outlines:

• Procedures for voluntary dissolution
• Voting requirements for major business decisions
• Rights of individual members regarding company operations
• Events that trigger automatic dissolution
• Buy-sell provisions that may apply instead of dissolution

California law gives significant weight to operating agreements, as established in Corporations Code section 17701.10, which states that the operating agreement governs relations among members and between members and the LLC.

If your operating agreement specifically addresses dissolution:

• Follow the procedures and requirements outlined in the agreement
• Adhere to any voting thresholds established for dissolution decisions
• Comply with notice requirements to other members

If your operating agreement is silent on dissolution: California’s default statutory provisions will apply, which generally require majority approval for dissolution.

Statutory Dissolution Methods in California

When a single member wishes to dissolve an LLC in California, several statutory options exist:

1. Dissolution by Unanimous Consent

Under California Corporations Code section 17707.01(b), an LLC may be dissolved by the unanimous written consent of all members. This is the cleanest and most straightforward method, but requires agreement from all members—making it unhelpful for situations where one member wants dissolution against others’ wishes.

2. Majority Vote Dissolution

California Corporations Code section 17707.01(b) also permits dissolution by a majority vote of the members, unless the operating agreement specifies a different voting threshold. For many LLCs, this means a single member with majority ownership could potentially force dissolution, while a minority member could not.

3. Judicial Dissolution

When a single member lacks sufficient voting power or faces resistance from other members, judicial dissolution may be an option. Under California Corporations Code section 17707.03, a member may apply to the superior court for an order of dissolution if:

• It is “not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement”
• The LLC’s managers or controlling members have acted in a manner that is “illegal, oppressive, or fraudulent”
• The LLC’s property is being misapplied or wasted

This pathway requires filing a formal lawsuit and proving specific grounds to the court’s satisfaction—a potentially lengthy and expensive process with no guaranteed outcome.

Alternative Options to Consider

Before pursuing dissolution, a single member should consider these alternatives:

1. Negotiating a Buyout

Rather than dissolving the entire LLC, a dissatisfied member might negotiate selling their membership interest to the remaining members or to the LLC itself. This allows the business to continue while providing an exit strategy.

California Corporations Code section 17706.03 addresses buyouts in the context of member dissociation, which can serve as a framework for negotiation.

2. Seeking Disassociation

Under California Corporations Code section 17706.02, a member may withdraw from an LLC under certain circumstances without dissolving the entire entity. This is known as dissociation and may be an option depending on your operating agreement’s provisions.

3. Mediation or Arbitration

Many operating agreements contain dispute resolution provisions requiring members to attempt mediation or arbitration before resorting to litigation. These processes can be faster and less costly than court proceedings.

Practical Considerations Before Attempting Dissolution

If you’re considering pursuing dissolution as a single member, evaluate these practical factors:

1. Review your operating agreement thoroughly—particularly provisions related to dissolution, voting rights, buyouts, and dispute resolution.
2. Assess your ownership percentage—if you hold a majority interest, you may have more options than a minority member.
3. Document legitimate business reasons for seeking dissolution, particularly if judicial dissolution might be necessary.
4. Calculate potential tax implications of dissolution, which can include recognizing gain or loss on distributed assets.
5. Consider the impact on ongoing contracts, employees, and other stakeholders before proceeding.

Potential Obstacles and Challenges

A single member seeking dissolution may face significant challenges:

• Defensive actions by other members, including litigation to block dissolution
• Buy-sell provisions that may force you to sell your interest rather than dissolve
• Contractual obligations that make immediate dissolution impractical
• Tax consequences that may make dissolution financially unfavorable
• Court reluctance to grant judicial dissolution except in extreme circumstances

When Legal Representation Becomes Essential

Attempting to dissolve an LLC without proper legal guidance can lead to prolonged disputes, unnecessary expenses, and potential liability. Professional legal counsel becomes particularly important when:

• Your operating agreement contains complex dissolution provisions
• Other members actively oppose dissolution
• Significant assets or liabilities need to be addressed
• Judicial dissolution appears to be the only viable option
• You want to negotiate the most favorable exit terms possible

How TONG LAW Can Assist With LLC Dissolution

At TONG LAW, our business attorneys have extensive experience with LLC governance disputes, including dissolution matters. We can help you:

• Analyze your operating agreement and membership rights
• Develop a strategic approach to achieving your business objectives
• Represent your interests in member negotiations
• Prepare and file necessary legal documents for dissolution
• Advocate for you in court if judicial dissolution becomes necessary

If you’re a California LLC member considering dissolution, contact TONG LAW for a confidential consultation. Our attorneys will review your specific situation, explain your legal options, and help you determine the most advantageous path forward.

With offices in Oakland and Sacramento, our business law team serves clients throughout California. Contact us to schedule a consultation and discuss your LLC dissolution concerns with an experienced business attorney.