Your co-owner filed to dissolve the LLC.

A petition to dissolve your LLC under Limited Liability Company Law 702 is not a complaint about fairness. The petitioner must show that management cannot or will not let the company’s stated purpose be achieved, or that continuing the company is financially unfeasible. Anger, exclusion, and deadlock, standing alone, do not meet that standard.

What does Limited Liability Company Law 702 actually say?

Limited Liability Company Law 702 permits the Supreme Court, on application by or for a member, to decree dissolution of a limited liability company “whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.” That one sentence is the entire statutory ground for relief.

The section adds one housekeeping rule. The applicant must file a certified copy of any dissolution order with the Department of State within thirty days of its issuance. Note also that the court may decree dissolution. Even a petitioner who meets the standard is seeking a discretionary remedy.

Read the operative words again: in conformity with the articles of organization or operating agreement. The measuring stick is the company’s own governing documents. The statute never mentions oppression, bad faith, freeze-out, or breach of fiduciary duty. Those may be real claims. They are not this claim.

Law: N.Y. Limited Liability Company Law 702.

What is the legal test for judicial dissolution of a New York LLC?

The controlling test comes from Matter of 1545 Ocean Ave., LLC. The petitioning member must establish, in the context of the terms of the operating agreement or articles, that management is unable or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or achieved, or that continuing the entity is financially unfeasible.

Two prongs. Purpose, or money.

The facts show how the test bites. Two managing members of a realty venture fell out, and the petitioner alleged deadlock and breaches of the operating agreement. That agreement let each managing member act unilaterally in furtherance of the company’s purpose, so there was no structural deadlock to break, and the renovation the company was formed to complete was three to four weeks from finishing. The Second Department reversed, denied the petition, and dismissed the proceeding. Dissolution, the court said, is a drastic remedy.

Two members of that panel would have remitted for a fact-finding hearing. Disputed facts can still buy a petitioner a hearing.

Case: Matter of 1545 Ocean Ave., LLC, 72 A.D.3d 121 (2d Dep’t 2010).

Is deadlock or dissension between members enough to dissolve an LLC?

Deadlock and dissension between LLC members, standing alone, do not satisfy Limited Liability Company Law 702. The Second Department made that explicit in 1545 Ocean: the court must first examine the operating agreement, and the dissolution standards developed under the Business Corporation Law and the Partnership Law do not govern limited liability companies.

Your co-owner may be furious. The two of you may not speak. Those facts matter only if they stop the company from doing what the governing documents say it exists to do. A company still selling, billing, and paying is hard to call one whose purpose can no longer be realized.

Hostility is not a ground. Frustration of purpose is. The petition has to connect the one to the other, and a petition that never attempts it is exposed from the day it is filed.

My co-owner says he was frozen out. Is oppression a ground under 702?

Oppression by itself is not a ground for dissolution under Limited Liability Company Law 702. In Doyle v. Icon, LLC, the First Department held that allegations of systematic exclusion from the operation and affairs of a company are insufficient to establish that it is no longer reasonably practicable to carry on the business, and it applied the 1545 Ocean standard.

The posture matters. The trial court had denied the defendants’ motion to dismiss the causes of action for judicial dissolution and appointment of a receiver. The First Department reversed and granted that motion.

The reasoning is worth borrowing. The plaintiff alleged that the defendants had withheld his share of the company’s profits and distributions. A company with profits to withhold is not financially unfeasible. The pleading supplied the answer to itself.

One qualification. Doyle turned on what that complaint alleged. A petition tying exclusion to a stalled purpose or real insolvency is a different pleading, and may require proof rather than a motion.

Case: Doyle v. Icon, LLC, 103 A.D.3d 440 (1st Dep’t 2013).

Which documents decide whether the 702 petition survives?

The articles of organization and the operating agreement frame the 702 petition from the first page. The statute measures conduct against those two documents, so the stated purpose of the company sets the target, and proof that the company is still pursuing that purpose and paying its bills answers both prongs of the 1545 Ocean test.

I read the articles of organization and the operating agreement before I read a word of the petition. I ask for two years of bank statements and the current rent roll before I ask anyone what went wrong.

Pull these, in this order:

• The articles of organization as filed with the Department of State, with every amendment. Find the purpose clause. Where the articles state only a broad lawful purpose, breadth generally helps you, though a court can look to the operating agreement for the actual purpose.
• The operating agreement, signed, with all amendments and side letters. Find the purpose, management, deadlock-breaking, transfer, and dissolution provisions.
• Proof of ongoing operations. Contracts, leases, invoices, permits, payroll, closings, deliveries, dated after the petition says the company stopped functioning.
• Proof of solvency. Bank statements, financials, tax returns, debt service history, a current balance sheet.
• Proof that management still functions. If one manager can act alone under the agreement, there is no deadlock to break.

How do you move to dismiss a claim for judicial dissolution?

A claim for judicial dissolution can often be tested before an answer. Where dissolution is pleaded as a cause of action in a plenary action, CPLR 3211 supplies the vehicle, and Doyle v. Icon, LLC was decided on that motion. Where dissolution is sought by petition in a special proceeding, CPLR 404(a) is the route.

Under CPLR 404(a) the objection in point of law goes in the answer, or in a motion to dismiss the petition made on notice within the time allowed for answer.

On a motion addressed to the sufficiency of the pleading, the court takes the allegations as true and asks whether they state either 1545 Ocean prong. Exclusion, withheld information, unequal pay, and refusal to meet do not. Allegations that the company still earns money undercut the financial prong.

The operating agreement can serve as documentary evidence, but only if it is authentic, unambiguous, and conclusively refutes the allegations. A signed agreement that assigns management authority to one manager, or supplies a mechanism for breaking an impasse, is the strongest version of that argument.

One caution. In a special proceeding the court determines the matter summarily only to the extent no triable issue of fact is raised, so a real factual dispute produces a hearing, not a dismissal.

Procedure: CPLR 3211(a)(1), (a)(7); CPLR 404(a); CPLR 409(b).

How is LLC dissolution different from corporate and partnership dissolution?

LLC dissolution in New York is contract-centric, while close-corporation and partnership dissolution are conduct-centric. Limited Liability Company Law 702 asks whether the business can be carried on in conformity with the governing documents. Business Corporation Law 1104-a asks whether those in control acted oppressively. Partnership Law 63 asks what a partner did.

The partnership statute asks whether the business can be carried on with that person. The LLC statute asks whether it can be carried on in conformity with the documents. The person drops out of the sentence. If the petition against you reads like a shareholder oppression petition, it was written for the wrong statute.

Law: LLC Law 702; BCL 1104-a; Partnership Law 63.

Can a court force me to buy out my co-owner, or force me to sell?

A buyout is possible even though the Limited Liability Company Law does not expressly authorize one in a dissolution proceeding. In Mizrahi v. Cohen, the Second Department held that in certain circumstances a buyout may be an appropriate equitable remedy upon the dissolution of an LLC, and authorized the plaintiff to purchase the defendant’s interest upon dissolution.

Understand the limits. That remedy is equitable and discretionary, granted on the facts of that case, and no member can demand it as of right. There is no LLC analogue to Business Corporation Law 1118, which lets a corporation or its shareholders elect to buy out a petitioner at fair value.

A buyout arises only if grounds for dissolution exist. Defeat the petition and the valuation fight never happens. Lose that fight and the endgame may not be a liquidation and a check, because one member may end up purchasing the other’s interest at a judicially determined value. Valuation is won with records, not adjectives.

The statute gives no buyout. Equity might, in the court’s discretion. Plan for an outcome where the company survives and one of you does not stay in it.

Case: Mizrahi v. Cohen, 104 A.D.3d 917 (2d Dep’t 2013). Law: BCL 1118.

Does the operating agreement control the exit?

The operating agreement, not the statute, usually supplies the exit. Limited Liability Company Law 701 dissolves a company on events specified in that agreement, or on the vote or written consent of at least a majority in interest of the members, subject to any agreement provision setting a greater or lesser percentage.

Limited Liability Company Law 606 bars a member from withdrawing before dissolution and winding up unless the operating agreement provides otherwise. Check the formation date. A company whose original articles were filed before that subdivision took effect in 1999 is governed by the older version, which treated withdrawal differently.

That pairing explains why your co-owner sued instead of resigning. Without a contractual exit, a member who wants out and cannot sell has one lever left.

Contract terms can also cut a petition off at the knees. In TZ Vista, LLC v. Helmer, decided in February 2025, the Second Department pointed to a provision by which the members waived the right to seek judicial dissolution, and affirmed the denial of summary judgment on the dissolution counterclaim. In the alternative, the movants had not shown frustration of purpose or financial infeasibility, and had not followed the agreement’s buy-sell procedure.

Do not overread that. New York law treats statutory dissolution rights as restrictable by contract but resists provisions nullifying them altogether, so a waiver clause is an argument, not a guaranteed ending. Read your agreement for a waiver, a buy-sell formula, a put or call right, and an appraisal mechanism.

Law: LLC Law 701; LLC Law 606. Case: TZ Vista, LLC v. Helmer, 2025 N.Y. Slip Op 00694 (2d Dep’t Feb. 5, 2025).

What should you do in the first week after the petition is served?

The first week after a 702 petition is served belongs to documents and deadlines, not to arguments. Calendar the response date immediately, because a special proceeding runs on a compressed schedule and relief from a default is never guaranteed. Then build the two-prong record the statute requires of the petitioner.

• Calendar the deadline. Note whether you were served with a summons and complaint or a notice of petition or order to show cause. The response window and the motion vehicle differ.
• Pull the governing documents and mark five provisions: purpose, management authority, impasse resolution, transfer or buy-sell, and dissolution or waiver.
• Freeze nothing and change nothing. Do not lock your co-owner out of records, accounts, or the premises. Self-help creates the facts the petition currently lacks.
• Preserve everything. Email, texts, accounting files, shared drives. Issue a written hold.
• Assemble the proof. Contracts signed, work performed, and revenue collected in the months the petition calls paralysis, plus bank statements, financials, and tax returns.
• Keep the company running. Continued ordinary operation is the best evidence you will have.

Then read the petition once more with the statute beside it. Underline every sentence alleging the company cannot pursue its stated purpose, and every sentence alleging it cannot pay its way. If those underlines are thin, this is not a dissolution case. It is a damages case wearing a dissolution costume.