Dissolving a Business Due to Shareholder Conflict: What You Need to Know

Business partnerships do not usually fall apart overnight. More often, the breakdown starts quietly. A disagreement over money. A difference in vision. A decision made without telling the other owners. Over time, those issues compound, trust erodes, and the business becomes impossible to run.

When shareholder conflict reaches that point, many business owners wonder if dissolving their business may be their only option. Sometimes, the answer is yes. Other times, there are alternatives worth exploring first. Either way, understanding how business dissolution works and when it becomes necessary is critical to protecting yourself, your investment, and your future.

What Is Shareholder Conflict in a Business?

Shareholder conflict refers to serious disputes between owners of a corporation or members of an LLC that interfere with the operation of the business. These disputes go beyond normal disagreements and usually involve issues such as:

• Disputes over control or voting rights
• Allegations of misuse of company funds
• Unequal distributions or withheld profits
• Deadlock between equal owners
• Breach of fiduciary duties
• Exclusion of a shareholder from management or decision-making

In Florida, these disputes often arise in closely held businesses, where there are only a few owners and no real separation between ownership and management.

When Shareholder Conflict Becomes Grounds for Dissolution

Not every disagreement justifies dissolving a business. Courts generally view dissolution as a last resort. That said, Florida law does allow judicial dissolution when certain conditions are met.

Common Grounds for Judicial Dissolution in Florida

A Florida court may dissolve a business when:

• The owners are deadlocked and cannot make decisions essential to the business
• Those in control are acting illegally or oppressively
• Corporate assets are being wasted or misapplied
• It is no longer reasonably practicable to operate the business

Deadlock is one of the most common reasons dissolution cases are filed. This often happens in fifty-fifty ownership situations where neither side can move the business forward.

Can You Be Forced to Dissolve a Business?

Yes. In some cases, one shareholder can petition the court to dissolve the business even if the other owners oppose it. Courts look closely at whether the conflict has made the business unworkable or unfairly prejudiced one of the owners.

However, dissolution is not automatic. The court may explore alternatives, especially if the business is still profitable or dissolution would cause unnecessary harm.

Alternatives to Dissolving the Business

Dissolution is serious. It ends the company’s existence and triggers liquidation, winding up, and distribution of assets. Before going down that road, it is often worth considering other solutions.

Buyout of a Shareholder

One common alternative is a forced or negotiated buyout. This allows one side to exit the business while the company continues operating. Disputes often arise over valuation, which is where litigation becomes necessary.

Mediation or Negotiated Separation

In some cases, structured negotiations can lead to a clean separation of ownership, revised operating agreements, or defined management roles that allow the business to survive.

Appointment of a Receiver or Custodian

Courts can appoint a neutral third party to temporarily manage the business when owners are deadlocked. This option is sometimes used to stabilize operations while disputes are resolved.

What Happens During a Business Dissolution?

If dissolution becomes unavoidable, the process is not instantaneous.

The Dissolution Process Typically Includes

• Filing a dissolution action in court
• Court review of shareholder conduct and deadlock
• Winding up the business
• Payment of debts and liabilities
• Distribution of remaining assets to shareholders

This process can take months or longer, especially if assets must be valued or sold.

How Dissolution Affects You Personally

One of the most common concerns business owners have is personal exposure. Dissolution does not automatically erase personal guarantees, loans, or individual liability. If the business has debts, creditors may still pursue owners depending on how the business was structured and operated.

This is why legal guidance matters early. Decisions made during conflict often have long-term financial consequences.

Why These Cases Require a Litigation Strategy

Shareholder disputes are not just business disagreements; they’re legal conflicts involving fiduciary duties, statutory rights, valuation disputes, and procedural rules that can significantly affect the outcome.

A poorly handled dissolution can leave money on the table or expose an owner to unnecessary risk. A well-handled one can bring closure, financial clarity, and a clean exit.

When to Speak With a Business Litigation Attorney

If shareholder conflict is escalating or the business feels unmanageable, it is usually a mistake to wait. Early legal advice can help preserve leverage, document misconduct, and explore solutions that are no longer available once litigation is underway.

At Ayala Law, we represent business owners in complex shareholder disputes, including dissolution actions, buyout litigation, and fiduciary duty claims. Our focus is on resolving these disputes strategically, not emotionally, and positioning our clients for the best possible outcome.

If you are facing a serious conflict with a business partner and need clarity on your options, contact an experienced attorney at 305-570-2208. 

You can also email our trial attorney Eduardo directly at eduardo@ayalalawpa.com.

Don’t hesitate to schedule a case evaluation with us online here.

[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case].