Dissociation of Members and Dissolution A member can transfer at least the fruits of his or her interest without dissociating with the company. When a dissociation does occur, however, unless the operating agreement specifies otherwise or a majority in interest of the members vote to continue, dissociation can mean dissolution of the company. Every at-will company will dissolve, and every term company will dissolve if the dissociation is of a certain category of involuntary dissociation. It is important to note that the operating agreement may specify the events that constitute dissolution, and there is provision for buying out a voluntarily dissociating member's interest upon dissociation without precipitating dissolution. Few limited liability companies are likely to rely upon the bare default rules of the Uniform Act, precipitating unwanted dissolutions.
Dissociations can be proper or wrongful.
A wrongful dissociation is still a dissociation, but the dissociating member will likely be liable to the company for that dissociation. When dissolution does occur, the company is put through the winding up of the business. Generally, creditors are satisfied, contributions are returned, and distributions made in this phase. A court can, upon a show of good cause, take over the winding up of a limited liability company. Conversion and Merger A limited liability company, like any business organization, is formed, does business, and then dissolves.