The 50/50 Minnesota LLC: Why Judicial Dissolution Is the Wrong Remedy and the Only One You Have Left

Two owners, fifty-fifty, no tiebreaker. It works for years, because two people who agree do not need a voting rule. Then they stop agreeing, and every mechanism in the company turns out to require exactly the thing that no longer exists.

The advice that follows is almost always the same: petition for judicial dissolution. It is bad advice, not because the ground is unavailable, but because of what the ground gets you. Minnesota’s corporate statute treats deadlock as a problem to be solved by a court-ordered buyout. Minnesota’s LLC statute does not have that provision. Read § 322C.0701 next to § 302A.751 and the gap is not subtle.

Who can ask a Minnesota court to dissolve an LLC, and on what grounds?

Minn. Stat. § 322C.0701, subd. 1 lists six dissolution events. Three of them are contractual or structural: an event the operating agreement says causes dissolution; the consent of all the members; and the passage of 90 consecutive days with no members. Clauses (1)–(3).

The judicial grounds are clauses (4) and (5), and both begin with the same three words — “on application by a member.” Not a manager. Not a governor. Not a transferee, and not a creditor.

(4) on application by a member, the entry by appropriate court of an order dissolving the company on the grounds that:

(i) the conduct of all or substantially all of the company’s activities is unlawful; or

(ii) it is not reasonably practicable to carry on the company’s activities in conformity with the articles of organization and the operating agreement;

(5) on application by a member, the entry by appropriate court of an order dissolving the company on the grounds that the managers, governors, or those members in control of the company:

(i) have acted, are acting, or will act in a manner that is illegal or fraudulent; or

(ii) have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the applicant

The sixth ground belongs to the attorney general, under § 322C.0708. Venue for a clause (5) proceeding is “a court within the county in which the registered office of the limited liability company is located,” and members need not be made parties “unless relief is sought against them personally.” Subd. 3.

Note what is not in the list. Chapter 322C contains no deadlock ground. A pure stalemate between two owners who each act in good faith has to be squeezed into clause (4)(ii) — “not reasonably practicable” — and that is where the trouble starts.

Why clause (4)(ii) is the wrong door

Because the alternative-remedy provision is not attached to it.

Minn. Stat. § 322C.0701, subd. 2, in full:

In a proceeding brought under subdivision 1, clause (5), the court may order a remedy other than dissolution, which may include the sale for fair value of all membership interests a member owns in a limited liability company to the limited liability company or one or more of the other members. A remedy other than dissolution may be ordered in any case where that remedy would be appropriate under all the facts and circumstances of the case.

The subdivision opens by scoping itself to clause (5) proceedings — the illegal, fraudulent, and oppressive-conduct ground. The second sentence is written broadly (“in any case”), but it sits inside a subdivision whose first words are a limitation, and the most natural reading is that it describes any case of that kind. Chapter 322C does not resolve the ambiguity.

The practical consequence is severe. A member whose only honest ground is clause (4)(ii) — nobody stole anything, nobody froze anybody out, the two simply cannot agree — is asking for a remedy the statute describes as dissolution and winding up. That is not a sale of one owner’s interest to the other. It is the end of the business: “A dissolved limited liability company shall wind up its activities, and the company continues after dissolution only for the purpose of winding up,” discharging debts, closing activities, and marshaling and distributing assets. § 322C.0702, subds. 1, 2(1). A going concern becomes a liquidation, and both owners get half of what a liquidation brings — reliably less than half of what the business was worth on Monday.

If the facts support clause (5), plead clause (5). It is the clause that carries the buyout.

Does chapter 322C have a buyout in lieu of dissolution, like § 302A.751?

No. Chapter 322C’s dissolution and winding-up sections run from § 322C.0701 through § 322C.0708, and nothing in that series is a buyout provision. The only alternative-remedy language in the chapter is the two sentences of § 322C.0701, subd. 2 quoted above.

Compare Minn. Stat. § 302A.751, which gives a shareholder an express deadlock ground:

(1) the directors or the persons having the authority otherwise vested in the board are deadlocked in the management of the corporate affairs and the shareholders are unable to break the deadlock;

Subd. 1(b)(1). A separate ground covers shareholders “so divided in voting power” that they failed to elect successor directors over two consecutive regular meetings, and creditors may petition on the terms in subd. 1(c). Subd. 1(b)(4).

Then subdivision 2 — headed “Buy-out on motion” — supplies actual machinery. In a non-publicly-held corporation, the court may, “upon motion of a corporation or a shareholder or beneficial owner of shares of the corporation,” order the sale of a plaintiff’s or defendant’s shares to the corporation or the moving shareholders “if the court determines in its discretion that an order would be fair and equitable to all parties under all of the circumstances of the case.” It sets a valuation date (“fair value … as of the date of the commencement of the action or as of another date found equitable by the court”); it defers to an existing agreement — where the shares are already subject to purchase under the bylaws, a shareholder control agreement, the terms of the shares, “or otherwise,” “the court shall order the sale for the price and on the terms set forth in them, unless the court determines that the price or terms are unreasonable under all the circumstances of the case”; it imposes a 40-day deadline after which the court determines fair value under § 302A.473, subd. 7; and it terminates the selling shareholder’s status once a bond is posted. Subdivision 3b then directs the court, before dissolving, to “consider whether lesser relief … such as any form of equitable relief, a buy-out, or a partial liquidation, would be adequate to permanently relieve the circumstances established under subdivision 1, clause (b) or (c).”

Chapter 322C has no counterpart to any of it. No motion procedure. No valuation date. No deference rule for an existing buy-sell. No deadline. No fair-value cross-reference. No lesser-relief directive. We covered the corporate version in our guide to shareholder oppression under § 302A.751; the LLC version is a fraction of it.

Chapter 322C’s answer to deadlock is that you were supposed to have written one.

Can I just quit?

You can. It usually costs you.

Section 322C.0601, subd. 1: “A person has the power to dissociate as a member at any time, rightfully or wrongfully, by withdrawing as a member by express will under section 322C.0602, clause (1).”

Read subdivision 2 before using it. A dissociation is wrongful if it “is in breach of an express provision of the operating agreement,” or if it “occurs before the termination of the company and … (i) the person withdraws as a member by express will.” § 322C.0601, subd. 2(1), (2)(i). And “[a] person that wrongfully dissociates as a member is liable to the limited liability company and, subject to section 322C.0901, to the other members for damages caused by the dissociation.” Subd. 3.

What you get in return is nothing. “A person’s dissociation does not entitle the person to a distribution.” § 322C.0404, subd. 2. On dissociation, “the person’s right to participate as a member in the management and conduct of the company’s activities terminates,” and the interest is thereafter owned “solely as a transferee.” § 322C.0603, subd. 1(1), (3). Walking out converts an owner with leverage into a spectator with a damages exposure.

Where the deadlock actually comes from

The arithmetic is in § 322C.0407, and the structure you chose decides which failure you get.

Member-managed. “Each member has equal rights in the management and conduct of the company’s activities.” Ordinary-course differences “may be decided by a majority of the members.” Acts outside the ordinary course require “the consent of all members,” and the agreement “may be amended only with the consent of all members.” § 322C.0407, subd. 2(2)–(5). In a two-member company there is no majority, so ordinary-course business has no decision rule — and the amendment rule means the owners cannot fix that without both agreeing to fix it.

Manager-managed, and this is the trap. “[A]ny matter relating to the activities of the company is decided exclusively by the managers.” Subd. 3(1). But “[a] manager may be chosen at any time by the consent of a majority of the members … A manager may be removed at any time by the consent of a majority of the members without notice or cause.” Subd. 3(5). In a 50/50 company that majority does not exist. Whoever holds the manager slot when the relationship breaks runs the company and cannot be voted out. The other owner’s only statutory recourse is § 322C.0410 information rights, a fiduciary claim under § 322C.0409, and a dissolution petition.

Board-managed. The board “shall consist of one or more governors as determined by members holding a majority of the voting power of the members.” Subd. 4(1), (3). This is the structure that can hold a neutral third governor — but only if the operating agreement installs one before the split, because afterward there is no majority to elect anyone.

The wrinkle nobody checks: your 50/50 may not be 50/50

If the company was formed before August 1, 2015, read § 322C.1204 before assuming anything about voting power. Subject to the operating agreement, for such a company “the voting power of each membership interest is in proportion to the value of the contributions of the members reflected in the records required by item (i)”; profits, losses, and distributions are allocated the same way; and “section 322C.0404, subdivision 1, does not apply.” § 322C.1204, subd. 3(3)(iii)–(vi). Former §§ 322B.383 and 322B.386 also continue to apply. Subd. 3(3)(vii).

So a company everyone calls “50/50” may have contribution-weighted voting that is not tied at all — either the answer to the deadlock or a second dispute on top of it. Our guide to Minnesota operating agreements and the statutory defaults covers the rest of the pre-2015 carryover.

What the operating agreement can build — and what it cannot

Section 322C.0110, subd. 2 is the enabling rule: “To the extent the operating agreement does not otherwise provide for a matter described in subdivision 1, this chapter governs the matter.” Deadlock is such a matter — “the activities of the company and the conduct of those activities,” and “relations among the members as members.” § 322C.0110, subd. 1(1), (3).

The hard limits are in subdivision 3. An operating agreement may not “unreasonably restrict the duties and rights stated in section 322C.0410” (information); “vary the power of a court to decree dissolution in the circumstances specified in section 322C.0701, subdivision 1, clauses (4) and (5)”; “vary the requirement to wind up a limited liability company’s business as specified in section 322C.0702, subdivisions 1 and 2, clause (1)”; “unreasonably restrict the right of a member to maintain an action under sections 322C.0901 to 322C.0906”; or, subject to subdivisions 4 to 7, eliminate the duty of loyalty, the duty of care, any other fiduciary duty, or the contractual obligation of good faith and fair dealing. Subd. 3(4)–(9).

Clause (7) is the one drafters get wrong. You cannot draft a Minnesota operating agreement that waives judicial dissolution. A clause reciting that the members irrevocably waive any right to seek dissolution under § 322C.0701 is void as to clauses (4) and (5), however it is worded. What you can do is make the courthouse unnecessary by giving each owner a faster and more attractive exit.

And subdivision 8 is why a well-drafted exit clause holds up. The only general fairness backstop on the freedom granted by subdivision 4 is that a term not be “manifestly unreasonable,” and the statute tells the court how to apply it:

The court … (1) shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and (2) may invalidate the term only if … it is readily apparent that: (i) the objective of the term is unreasonable; or (ii) the term is an unreasonable means to achieve the provision’s objective.

§ 322C.0110, subd. 8. A buy-sell formula is judged as of the day it was adopted, not the day it was triggered — which is exactly backwards from how the losing party will argue it, and exactly why the clause should be negotiated when nobody knows who will be the buyer.

Five exits, and what each one costs

Two drafting cautions. First, chapter 322C permits arbitration in winding up (§ 322C.0702, subd. 2(2)(v)) while forbidding an operating agreement to unreasonably restrict a member’s right to maintain an action under §§ 322C.0901 to 322C.0906 or to vary the court’s dissolution power (§ 322C.0110, subd. 3(7), (9)). The chapter does not say how those fit together. Draft the clause to channel contract and valuation disputes to arbitration without purporting to strip the statutory dissolution remedy — and see what Minnesota can and cannot resist in arbitration.

Second, the operating agreement is also the yardstick for the oppression ground. “Oppressive” turns on an expectation that “is not contrary to the operating agreement as applied consistently with the contractual obligation of good faith and fair dealing,” and conduct “is not oppressive solely by reason of a good faith disagreement as to the content, interpretation, or application of the company’s operating agreement.” § 322C.0102, subd. 18(a)(3)(iv), (b)(2). A precise agreement narrows what a court can call oppression. We treat that path in Minnesota LLC member disputes and buyouts.

What to do

• If you are drafting now, install the exit and the tiebreaker in the same sitting. Both require unanimity to add later (§ 322C.0407, subd. 2(5), subd. 3(4)(iv)), and unanimity is the first casualty of a deadlock.
• Pick the structure for the fight, not the formation. A 50/50 manager-managed company hands permanent control to whoever is named manager.
• If you are already deadlocked, inventory clause (5) before you file clause (4)(ii). Diverted revenue, a terminated salary, blocked information, self-dealing with a related entity — those are clause (5) facts, and clause (5) is where § 322C.0701, subd. 2 lives.
• Do not withdraw to make a point. Section 322C.0601, subd. 2(2)(i) makes an express-will withdrawal before termination wrongful, and § 322C.0404, subd. 2 gives you nothing for it.
• Value the business before you take a position. Neither side can negotiate a buyout without a number.

Judicial dissolution is a real remedy and sometimes the right one. But in a 50/50 LLC with no wrongdoing, it is a court order to sell a working business at auction and split the proceeds. The corporate statute lets a judge fix that with a buy-out on motion. The LLC statute leaves it to the document you signed at the beginning — which is why the beginning is the only cheap time to write it.

Madgett Law, LLC represents owners of closely held Minnesota LLCs on both sides of a deadlock — negotiating and litigating buyouts, bringing and defending petitions under § 322C.0701, and drafting the buy-sell, valuation, and tiebreaker provisions that keep the dispute out of court. If you are 50/50 with someone you no longer talk to, the sequence of your first three moves matters. Send us a message or call 612-470-6529.

Sources: Minn. Stat. § 322C.0701 (events causing dissolution — subd. 1, clauses (1)–(3) contractual and structural events; clause (4), application by a member on the grounds of unlawful conduct or that it is not reasonably practicable to carry on the company’s activities in conformity with the articles and the operating agreement; clause (5), application by a member on the grounds of illegal, fraudulent, or oppressive conduct by managers, governors, or those in control; clause (6), action by the attorney general under § 322C.0708; subd. 2, alternative remedies “[i]n a proceeding brought under subdivision 1, clause (5),” including sale for fair value of all membership interests a member owns; subd. 3, venue and parties); Minn. Stat. § 322C.0702, subds. 1 and 2 (winding up required; the winding-up process, including settling disputes by mediation or arbitration at subd. 2(2)(v)); Minn. Stat. § 322C.0110 (subd. 1, matters the operating agreement governs; subd. 2, default supplementation; subd. 3, clauses (4)–(9), restrictions including the bar on varying the court’s dissolution power under § 322C.0701, subd. 1, clauses (4) and (5); subd. 8, the court’s determination of manifest unreasonableness as of the time the term became part of the agreement and only where readily apparent); Minn. Stat. § 322C.0407 (subd. 2(2)–(5), member-managed rules — equal rights, majority of the members for ordinary course, unanimity for extraordinary acts and amendment; subd. 3(1) and (5), manager-managed rules — exclusive manager decision-making and selection and removal of managers by a majority of the members; subd. 4(1) and (3), board-managed rules — number and election of governors determined by majority voting power); Minn. Stat. § 322C.0601 (subd. 1, power to dissociate at any time rightfully or wrongfully; subd. 2, when dissociation is wrongful, including withdrawal by express will before termination; subd. 3, liability for damages caused by wrongful dissociation); Minn. Stat. § 322C.0404, subd. 2 (no right to an interim distribution unless the company decides to make one; dissociation does not entitle a person to a distribution); Minn. Stat. § 322C.0603, subd. 1 (effect of dissociation); Minn. Stat. § 322C.0102, subd. 18(a)(3)(iv), (b)(2) (definition of “oppressive,” including the operating-agreement element and the good-faith-disagreement exclusion); Minn. Stat. § 322C.1204, subd. 3(3)(iii)–(vii) (application to limited liability companies formed before August 1, 2015 — inapplicability of § 322C.0404, subd. 1, contribution-weighted allocation of profits and losses, voting power, and distributions, and continued application of former §§ 322B.383 and 322B.386); Minn. Stat. § 302A.751 (subd. 1(b)(1) deadlock ground, subd. 1(b)(4) failure to elect directors, subd. 1(c) creditor actions, subd. 2 buy-out on motion including the valuation date, the deference to existing purchase agreements, the 40-day period and cross-reference to § 302A.473, subd. 7, and the effect of posting bond; subd. 3b, consideration of lesser relief) (Minnesota Office of the Revisor of Statutes, 2025 Minnesota Statutes). Chapter 322C’s dissolution and winding-up sections run from § 322C.0701 through § 322C.0708; no section in that series provides a buyout mechanism comparable to § 302A.751, subd. 2. This article is general legal information about Minnesota law, not legal advice, and reading it does not create an attorney–client relationship. Whether any ground for dissolution or any drafted exit mechanism applies to a particular company depends on the specific facts, the operating agreement, and the governing law. No outcome is promised or implied.