LLC Dissolution

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It’s been 15 years since the Second Department’s decision in Matter of 1545 Ocean Avenue, LLC, 72 AD3d 121, 2010 NY Slip Op 00688 (2d Dept Jan. 26, 2010), which established the standard for judicial dissolution of limited liability companies.  Under that standard, a New York LLC should be judicially dissolved when the management of the company is unable or unwilling to permit or promote the stated purpose of the entity, or continuing the entity is financially unfeasible.

That standard has proved both enduring and highly fact-specific, producing over the last decade and a half a landscape of judicial decisions finding that specific conduct and circumstances do—or do not—warrant dissolution. 

I’ve also seen at least some disconnect between that standard and the real interests of many LLC members.  On the one hand, the standard focuses on two things: (i) the stated purpose of the LLC as set forth in the operating agreement, and (ii) the financial feasibility of the LLC.  On the other hand, in many cases, the “stated purpose” as set forth in the operating agreement is boilerplate that the owners never considered.  And the financial feasibility of the LLC usually is a given; people tend not to litigate over failing businesses. Most owners who resort to judicial dissolution do so for other reasons. 

Many LLC members seek judicial dissolution as a means to resolve distrust of or perceived misconduct by their co-owners.  And while there is room for consideration of those things in the “unable or unwilling” language of the dissolution standard, a court faithfully applying the 1545 Ocean Avenue standard and a party seeking his day in court about allegations of member misconduct might feel like they’re speaking different languages.

A recent decision from New York County, Otsuka v Shimura, No. 159202/2020 (Sup Ct, New York County 2025), serves as a fine springboard to highlight that disconnect, discuss the timing of an LLC dissolution claim, and take stock of the current LLC dissolution landscape.Continue Reading Stated Purpose vs. Stated Problem: Court Sticks to the Script for LLC Dissolution

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In an apparent first of its kind decision, the Second Department reinstated dissolution claim brought by the estate of a deceased LLC Member. This week’s post considers the decision and its potential impact.
Continue Reading Who Died and Made You a Member?  Second Department Resurrects LLC Dissolution Petition Brought by Deceased Member’s Estate.

In this week’s New York Business Divorce, a would-be LLC dissolution plaintiff goes down swinging on an unanswered complaint within an unopposed motion for a default judgment, just the latest example of New York courts closely scrutinizing the merits of LLC dissolution claims at the pleadings stage.
Continue Reading Swing and a Miss: Unopposed LLC Dissolution Claim Denied

A hot topic of late, the viability in New York of common-law dissolution of limited liability companies is cast into doubt by a new decision, the third in a series from Brooklyn Commercial Division Justice Leon Ruchelsman. Read about it, and where the case law may go from here, in this week’s New York Business Divorce.
Continue Reading Common-Law and Equitable LLC Dissolution: Going, Going, . . .

In this week’s New York Business Divorce, companion appellate decisions issued last week in the long running Kassab v Kasab litigation emphasize the fundamental legal differences between corporate and LLC dissolution, with allegations of majority “oppression” sufficient to grant dissolution in one case, but so insufficient as to require pre-answer dismissal in the other.
Continue Reading To Dissolve or Not to Dissolve, that is the Question. The Answer is Both.

In this week’s New York Business Divorce, we consider a remarkably thoughtful opinion by Commercial Division Justice Jennifer G. Schecter containing some noteworthy hints about the future of LLC dissolution claims in light of the coronavirus pandemic and its catastrophic economic impact on New York closely-held businesses.
Continue Reading Will the Pandemic Be a Boon for Future LLC Dissolution Claimants?

If you bring a business divorce case, do you unwittingly expose yourself to a countersuit for defamation? A recent decision addresses that question in the context of withdrawn petitions by two brothers against their uncle to dissolve three family-owned businesses in this week’s New York Business Divorce.
Continue Reading Sue for Dissolution – Get Sued for Defamation?

A minority member of an LLC that operates a Manhattan restaurant learned how tough it can be to get judicial dissolution of a financially sound LLC that’s achieving its intended purpose, notwithstanding allegations of majority oppression. It’s in this week’s New York Business Divorce.
Continue Reading LLC’s Purpose Being Achieved? Business Doing Fine? Good Luck Getting Judicial Dissolution