What Are the Options When a Partner Chooses to Leave a Business?
Quick answer: If you own half of a Florida LLC and want out, start with the operating agreement: it may already set a buyout, a transfer process or withdrawal terms. Without a usable exit clause, the usual paths are a negotiated buyout, a sale of your interest if the agreement allows it, an agreed dissolution, or a court petition to dissolve the company on grounds such as a deadlock that is causing irreparable harm. Withdrawing on your own does not by itself require the company to pay you out under Florida's LLC statute. Which path fits depends on the agreement, the business's value and debts, and how the two of you are getting along.
Related practice: Partnership and shareholder disputes · Business dissolution · Operating agreements
Owners leave businesses for many reasons: a disagreement about direction, a new opportunity, retirement, or simple fatigue with a deadlock. In a 50/50 company neither owner can outvote the other, so the exit usually has to be negotiated, taken from the agreement, or decided by a court.
In this guide
- Start with the operating agreement
- Option 1: a negotiated buyout
- Option 2: selling or transferring your interest
- Option 3: withdrawing from the LLC
- Option 4: agreeing to dissolve
- Option 5: asking a court to dissolve the company
- Protecting your position while you negotiate
- Partnerships and corporations work differently
- What to gather
- Frequently asked questions
Start With the Operating Agreement
Florida's Revised Limited Liability Company Act, Chapter 605, fills gaps, but the operating agreement controls most exit questions. Look for:
- Buy-sell terms: events that trigger a purchase, who must buy, and how the price is set
- Withdrawal or resignation terms: whether a member may withdraw, the notice required, and what happens to the member's interest
- Transfer restrictions: consent requirements and rights of first refusal
- Deadlock provisions: a tie-breaker, mediation, arbitration or a forced-sale mechanism
- Restrictive covenants: non-competition, non-solicitation and confidentiality terms that bind you after you leave
- Dispute clauses: mediation, arbitration, venue and attorney's fees
If there is no written operating agreement, or it is silent on exits, Chapter 605's default rules apply.
Option 1: A Negotiated Buyout
Most 50/50 exits end with one owner buying the other out. A workable buyout agreement usually covers:
- Price and how it is set: an agreed number, an appraisal, or a formula from the operating agreement
- Payment terms: cash at closing, installments, security for any unpaid balance
- Releases: mutual releases of claims between the members and the company
- Personal guarantees: removal from leases, loans and credit lines you guaranteed, or indemnity if the lender will not release you
- Restrictive covenants: what you may do next, and for how long
- Taxes and records: final allocations and access to records you need; involve your CPA
Option 2: Selling or Transferring Your Interest
You may be able to sell your interest to the other member or a third party if the operating agreement permits it. Under Chapter 605, a buyer of a transferable interest generally receives only the economic rights, such as distributions, and does not become a member with management rights unless the members consent. That limits what an outside buyer will pay.
Option 3: Withdrawing From the LLC
Florida law gives a member the power to withdraw at any time by giving notice of the member's express will to withdraw. Having the power is not the same as having the right. Under the statute, a withdrawal is wrongful if it breaches an express term of the operating agreement, and the statute's text also treats a withdrawal by express will before the company has finished winding up as wrongful. A member who withdraws wrongfully can be liable to the company, and in some cases to the other members, for damages the withdrawal causes.
The bigger surprise for most owners: withdrawal ends your right to take part in management, but it does not by itself require the company to buy your interest. Unless the operating agreement provides otherwise, you generally keep only the economic rights of a transferable interest. Many owners who withdraw without a deal end up with no voice in the company and no payout.
Option 4: Agreeing to Dissolve
The members can agree to dissolve the company, wind up its affairs, pay or provide for creditors, and distribute what remains. A 50/50 dissolution still needs agreement on who keeps the customers, the name, the equipment and the leases. See business dissolution for how the wind-up works.
Option 5: Asking a Court to Dissolve the Company
A member can ask a Florida circuit court to dissolve an LLC on grounds set by statute, including when:
- the conduct of all or substantially all of the company's activities is unlawful;
- it is not reasonably practicable to carry on the company's activities in conformity with the articles of organization and the operating agreement;
- the managers or members in control have acted, are acting or are reasonably expected to act in a manner that is illegal or fraudulent;
- the company's assets are being misappropriated or wasted, causing injury to the company or, in a member's case, to one or more members; or
- the managers or members are deadlocked in management, the members cannot break the deadlock, and irreparable injury to the company is threatened or being suffered.
A 50/50 deadlock is not automatically enough; the statute also requires that the members cannot break it and that irreparable injury is threatened or occurring. If the operating agreement has its own deadlock-sale procedure and it is started before the court rules on the deadlock, that procedure generally controls.
When a member petitions on one of these grounds, the company, or if it does not, one or more of the other members, may elect to purchase the petitioner's entire interest at fair value instead of dissolution, generally within 90 days after the petition is filed. If the parties do not agree on the price, the court determines it. In practice, that can turn a dissolution case into a buyout.
Protecting Your Position While You Negotiate
- Ask for the records. Members have statutory rights to inspect and copy company records and information, and the operating agreement cannot unreasonably restrict them. In a member-managed company, the company generally must respond to a written demand within 10 days. Make the request in writing and list what you want.
- Know the duties you owe and are owed. Members of a member-managed LLC owe the company and the other members duties of loyalty and care, and an operating agreement cannot eliminate them entirely.
- Do not take company property, clients or funds. Self-help moves can create claims against you and weaken your position.
- List your personal guarantees. Leaving the company does not release a guarantee you signed; the lender or landlord must agree, or the buyout must cover it.
- Check your restrictive covenants before you start a competing business.
Partnerships and Corporations Work Differently
A general partnership follows Chapter 620, which has its own rules on dissociation and, in some cases, a buyout of the departing partner's interest. A corporation follows Chapter 607, which has its own grounds for judicial dissolution and its own election-to-purchase procedure. If your company is not an LLC, the analysis above changes.
What to Gather
- Articles of organization and the current Sunbiz record
- The operating agreement and every amendment, or a note that none exists
- Recent tax returns, K-1s and financial statements
- Bank and loan statements, leases and any personal guarantees
- Emails or texts showing the deadlock or the disputed decisions
- Any restrictive covenant you signed
Frequently Asked Questions
Can I simply quit my LLC?
You have the power to withdraw by giving notice, but Florida's statute can treat the withdrawal as wrongful, which can make you liable for damages it causes, and withdrawing does not by itself entitle you to be paid for your interest. Read the agreement and get advice before you send a notice.
Does the company have to buy me out if I leave?
Not under Chapter 605's default rules. A buyout obligation usually comes from the operating agreement, from a negotiated deal, or from a buyout election in a judicial dissolution case.
Can my 50/50 partner remove me?
In a 50/50 company, one member usually cannot outvote the other. Expulsion is possible only under the operating agreement, on a few narrow statutory grounds, or by court order for serious misconduct or a material breach.
Can I see the company's books?
Generally yes. Florida law gives members inspection rights, subject to the operating agreement and statutory limits. A written request that lists the records is the usual first step.
Will a court dissolve the company just because we are deadlocked?
Not on deadlock alone. The statute also requires that the members cannot break the deadlock and that irreparable injury to the company is threatened or being suffered.
What happens to my personal guarantee when I leave?
It usually stays in place until the lender or landlord releases you. Make your release, or an indemnity, part of any buyout.
Related Reading
- The Role of Fiduciary Duties in Business Partner Relationships
- How Can Business Partner or Shareholder Disputes Be Resolved?
- Can You Personally Be Liable for Your Business's Debt?
About the author. Gavin T. Elliot, Esq. is the Founder and Senior Managing Attorney of The Elliot Legal Group, P.A. in Fort Lauderdale, where the firm handles partnership, shareholder and LLC member disputes. Read Gavin's profile.
Talk to the Firm About Leaving a Florida LLC
The Elliot Legal Group, P.A. represents LLC members and business owners in ownership disputes and exits from its office at 115 NE 3rd Avenue, Suite 707, Fort Lauderdale. Request an Initial Case Assessment or call (754) 332-2101. The first call is with Jenny Elliot, who is not an attorney, and does not include legal advice or document review. The team confirms any attorney consultation fee, scope and payment arrangements before booking.
General information, not legal advice. Reading this article or contacting the firm does not create an attorney-client relationship.