MBE Rules · Business Associations
LLC Dissolution
Cal. Corp. Code § 17707.01
The rule
An LLC dissolves on events in the operating agreement, majority-member vote, or court order for frustrated purpose or deadlock; 50% membership may petition, and winding up follows partnership-style waterfalls.
In plain English
An LLC can be dissolved based on specific events outlined in its operating agreement, if a majority of members vote for dissolution, or through a court order due to issues like deadlock or frustrated purpose. Once dissolved, the LLC goes through a winding-up process that distributes its assets according to a partnership-style waterfall method.
Worked example
An LLC's operating agreement states that it will dissolve if a majority of members agree. After a contentious meeting, 60% of the members vote to dissolve the LLC due to ongoing disputes. The LLC is then dissolved and its assets are distributed according to the partnership-style waterfall. The outcome is that the LLC is officially dissolved and assets are divided among the members.
Memory hook
Dissolve an LLC with a vote, an agreement, or a court's order!
The trap
Exams may present scenarios where students confuse the grounds for dissolution, especially between voluntary and court-ordered dissolution, leading to incorrect conclusions about the process.
How examiners test it
Questions often involve fact patterns that test the understanding of the specific events leading to dissolution and the subsequent asset distribution process.
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