As with distributions to members of a limited liability company (LLC) before dissolution, the first place to look for how distributions are to be made and more importantly, split amongst members upon dissolution is the company’s articles of organization or written operating agreement. The controlling statute in Georgia regarding distributions before and after dissolution is O.C.G.A. 14-11-404.

Unfortunately, most businesses do not provide for distributions in their articles of organization. Pursuant to the statute this leaves it entirely up to the operating agreement. What happens if your business does not have an operating agreement? Can a business attorney help?

O.C.G.A. 14-11-404 states that when there is no provision in the articles of organization and nothing in the operating agreement or no operating agreement at all, distributions at the time of or after dissolution are to be shared equally among the members.

This can be a huge problem when for example you have no agreement in writing regarding the distribution share amongst members during the business relationship. For example, lets say you and your partner have no written operating agreement or other written agreement amongst yourselves memorializing your verbal agreement to split distributions 70% (you)-30% (her). All is well with the running of the company and your verbal agreement about your split of distributions until one day you two have a falling out. You agree the mechanism to resolve your differences is to dissolve the LLC and move on. Your partner suggests the split of the remaining assets should be 50%-50%. Your position is understandably it has always been 70-30 and it should be that way upon dissolution.

Under Georgia law, your partner could for a 50-50 split upon dissolution and could even force a dissolution in the Superior Court of the county of your business’ principal office. The take away– 1). Get with an Atlanta business attorney from the very beginning to properly set up your LLC with a solid operating agreement; (2) get all agreements with partners in writing.