What Does an Automatic Dissolution of an LLC Mean?

by Gail Sessoms
The LLC owner is called a member.

The LLC owner is called a member.

Jupiterimages/liquidlibrary/Getty Images

The limited liability company, a legal business structure under state laws, offers favorable features of both the corporation and partnership structures. Dissolution, which often is voluntary, is the end of life for a business. State laws vary, but the involuntary automatic dissolution of an LLC is a legal action taken by state governments when certain events take place within the LLC.

Automatic Dissolution

When an LLC is subjected to automatic dissolution, the business is, in fact, dissolved. Automatic dissolution requires the LLC to stop doing business, fulfill outstanding obligations and divide assets among members. State LLC laws provide instruction for all aspects of the dissolution, including filing of a certificate of dissolution, articles of dissolution or other required document.


Many states require automatic dissolution if a member leaves or dies, if the LLC changes its business structure or if it fails to comply with applicable laws. Judicial dissolution may result if the state determines the LLC cannot continue to legally operate. Some laws require automatic dissolution if the LLC’s operating agreement or articles of incorporation specify a date or event as a trigger.

Administrative Dissolution

Some state laws require administrative dissolution or revocation when an LLC fails to perform its legal or fiduciary duties, such as paying taxes or licensing fees. Many states conduct annual dissolutions of LLCs that are not compliant with state regulations. Administrative dissolution is not final, however. The LLC must voluntarily and legally dissolve if members choose not to continue operations.

Prevention and Revocation

Members of an LLC can prevent automatic dissolution due to loss of members by creating a buy-out agreement when the LLC is formed, according to legal website Nolo. Some states allow the remaining LLC members to vote to continue business, request revocation of automatic dissolution or apply for reinstatement following administrative dissolution.

About the Author


Photo Credits

  • Jupiterimages/liquidlibrary/Getty Images
bibliography-icon icon for annotation tool Cite this Article