A court may order dissolution of a corporation or LLC on grounds set by statute. It is rarely the outcome anyone actually wants, and it is often the leverage that produces a buyout.

Common statutory grounds. Director or shareholder deadlock causing irreparable injury or preventing the business from being conducted to advantage; illegal, oppressive or fraudulent conduct by those in control; waste or misapplication of assets; and, for LLCs, that it is not reasonably practicable to carry on the business in conformity with the operating agreement.

Not reasonably practicable is the LLC standard in many states and is narrower than oppression. Courts ask whether the management is unable or unwilling to pursue the stated purpose, or whether operations are effectively paralysed — not whether the members dislike each other.

The buyout election. Many statutes permit the company or the other owners to avoid dissolution by electing to purchase the petitioner’s interest at fair value, with the court fixing the price if the parties cannot agree. This converts the case into a valuation dispute, which is where most of them end.

Alternatives short of dissolution. Receivership, custodianship, ordered accounting, and injunctive relief against specific conduct.

Agreement drafting can pre-empt all of it with deadlock-breaking mechanics and a defined valuation formula.