A majority vote alone does not expel a member of a Minnesota limited liability company (LLC) unless the operating agreement allows it. Outside the agreement, the other members can expel you without a court only by unanimous consent and only on narrow grounds. A court can expel you only if the company applies. The grounds are wrongful conduct, a willful or persistent material breach, or conduct that makes it “not reasonably practicable to carry on the activities with the person as a member.” What a majority owner may be able to do is remove you from management and stop distributions, which leaves you an owner with no role and no income. That power depends on the operating agreement, how the company is managed, and whether votes count by member or by ownership share. Minnesota’s main answer to that freeze-out is a member’s court application to dissolve the company, in which the court may instead order a sale of a member’s interests for fair value.

Minnesota statute governs this question, together with your operating agreement. Under Minn. Stat. § 322C.1204, subd. 2, chapter 322C, the Minnesota Revised Uniform Limited Liability Company Act, “governs all limited liability companies” on and after January 1, 2018, including those formed under the old chapter 322B. This page is for minority members of Minnesota LLCs. If your company is a corporation, chapter 322C does not apply, and the shareholder remedy is Minn. Stat. § 302A.751, covered on my pages on forced buyouts under § 302A.751 and shareholder oppression claims. This page is part of my ownership disputes practice.

How can a member be expelled from a Minnesota LLC?

A member of a Minnesota LLC can be expelled in three ways: under the operating agreement, by the unanimous consent of the other members on a few statutory grounds, or by a court order the company requests. None of the three is a simple majority vote, unless the operating agreement makes it one.

Minn. Stat. § 322C.0602 lists the events that end a person’s membership. Three of them are expulsions:

  1. Under the operating agreement. Clause (3) covers a person “expelled as a member pursuant to the operating agreement,” and clause (2) covers “an event stated in the operating agreement as causing the person’s dissociation.” If your agreement lets a majority expel a member, or ends membership on events such as the end of employment, those terms come first.
  2. By the other members, unanimously. Clause (4) allows expulsion “by the unanimous consent of the other members,” but only if a listed ground exists. For an individual member, the grounds are that “it is unlawful to carry on the company’s activities with the person as a member,” or that “there has been a transfer of all of the person’s transferable interest in the company” (with exceptions for a pledge as security and an unforeclosed charging order). The other two grounds reach only a member that is itself a corporation, LLC, or partnership that has dissolved or lost its charter or right to do business.
  3. By a court, on the company’s application. Clause (5) allows expulsion “on application by the company” by “judicial order,” and only for wrongful conduct that “has adversely and materially affected, or will adversely and materially affect, the company’s activities,” a willful or persistent material breach of the operating agreement or of the member’s duties, or conduct “which makes it not reasonably practicable to carry on the activities with the person as a member.”

A merger can also end your membership. Under clause (11), a person is dissociated when the company merges and “otherwise as a result of the merger, the person ceases to be a member.” Minn. Stat. § 322C.1003, subd. 1 provides that “a plan of merger or exchange must be consented to by all the members.” That default can change, because Minn. Stat. § 322C.0110, subd. 2 provides that “To the extent the operating agreement does not otherwise provide for a matter described in subdivision 1, this chapter governs the matter,” so I suggest reading the agreement’s merger vote along with its expulsion clause.

If the majority threatens to expel you, I suggest asking in writing which route it relies on and, for the court route, which ground and which facts, because each route has its own requirements. My page on expelling a member without cause covers agreements that allow removal with no reason given.

What can a majority owner do to you without expelling you?

A majority owner may be able to take away your role and your income without ending your membership. Depending on how the LLC is managed, a majority of the members, or of the voting power in a board-managed LLC, can remove you as a manager or governor, decide ordinary business matters, and decline to make distributions. Under the default rules, a majority cannot amend the operating agreement.

Minn. Stat. § 322C.0407 sets the default rules for each management structure:

  • Member-managed LLCs. Under subdivision 2, “A difference arising among members as to a matter in the ordinary course of the activities of the company may be decided by a majority of the members.” The same subdivision provides that “The operating agreement may be amended only with the consent of all members.”
  • Manager-managed LLCs. Under subdivision 3, “A manager may be removed at any time by the consent of a majority of the members without notice or cause.” Losing the manager role does not end your membership: “that cessation does not by itself dissociate the person as a member.” Subdivision 3 also requires the consent of all members to amend the operating agreement.
  • Board-managed LLCs. Under subdivision 4, “A governor may be removed at any time, without cause and without advance notice, by a majority of the voting power of all of the members.” A member removed as a governor also stays a member, and subdivision 4 likewise lists amending the operating agreement among the acts that require “The consent of all members” in a board-managed company.

A majority owner does not always hold these majorities. In a member-managed LLC, “Each member has equal rights in the management and conduct of the company’s activities,” so the votes in subdivisions 2 and 3 count members. In a board-managed LLC, “each member possesses voting power in proportion to the member’s interest in distributions of the limited liability company prior to dissolution.” For an LLC formed before August 1, 2015, Minn. Stat. § 322C.1204, subd. 3 provides, subject to the operating agreement, that “the voting power of each membership interest is in proportion to the value of the contributions of the members reflected in the records required by item (i).”

Money is the other lever. Under Minn. Stat. § 322C.0404, subd. 2, “A person has a right to a distribution before the dissolution and winding up of a limited liability company only if the company decides to make an interim distribution.” The majority cannot pay only itself by default: under subdivision 1, distributions “must be in equal shares among members and dissociated members,” a rule that does not apply to LLCs formed before August 1, 2015. For those older LLCs, § 322C.1204, subd. 3, provides, subject to the operating agreement, that distributions “must be allocated in proportion to the value of the contributions of the members reflected in the records required by item (i).” These defaults yield to the operating agreement, which under Minn. Stat. § 322C.0110, subd. 1 governs “the means and conditions for amending the operating agreement.” My page on removing an LLC manager covers the manager side in more detail.

What limits apply to the majority’s rights under the operating agreement?

The operating agreement governs the relations among a Minnesota LLC’s members, but chapter 322C sets limits it cannot cross. An operating agreement cannot eliminate the obligation of good faith and fair dealing, cannot take away a court’s power to dissolve the company for oppressive conduct, and cannot unreasonably restrict your right to company information.

Under Minn. Stat. § 322C.0110, subd. 3, an operating agreement may not “eliminate the contractual obligation of good faith and fair dealing under section 322C.0409, subdivision 4,” may not “unreasonably restrict the duties and rights stated in section 322C.0410,” and may not “vary the power of a court to decree dissolution in the circumstances specified in section 322C.0701, subdivision 1, clauses (4) and (5).” Subdivision 4 lets the agreement “prescribe the standards by which to measure the performance of the contractual obligation of good faith and fair dealing,” but only “If not manifestly unreasonable.”

The good-faith obligation reaches the majority’s use of its own contract rights. Minn. Stat. § 322C.0409, subd. 4 requires a member to “exercise any rights under this chapter or under the operating agreement consistently with the contractual obligation of good faith and fair dealing, including acting in a manner, in light of the operating agreement, that is honest, fair, and reasonable.” An expulsion clause is a right under the operating agreement, so that standard applies when the majority uses it.

Read the buyout terms as closely as the expulsion clause. In one exit matter I analyzed, the operating agreement treated a member as offering to sell all of the member’s units the moment the member stopped being actively involved in the business. It let the buyer choose the appraiser and pay a fraction at closing with the rest on an unsecured company note. None of those terms operated until the member stepped back, so the time to negotiate them was before the member’s role changed. If your agreement ties a buyout to employment or active involvement, a removal from your job may set it in motion. My page on redemption provisions explains how those clauses are built.

What duties does the majority owe a minority member?

In a member-managed Minnesota LLC, each member owes the company and the other members fiduciary duties of loyalty and care. In a manager-managed or board-managed LLC, those duties belong to the managers or governors, not to members as members. Every member owes the obligation of good faith and fair dealing.

The baseline is Minn. Stat. § 322C.0409, subd. 1. It provides that “A member of a member-managed limited liability company owes to the company and, subject to section 322C.0901, subdivision 2, the other members the fiduciary duties of loyalty and care.” The duty of loyalty in subdivision 2 includes the duty “to account to the company and to hold as trustee for it any property, profit, or benefit derived by the member” in the company’s activities, from use of company property, or from appropriating a company opportunity. It also includes the duty “to refrain from dealing with the company in the conduct or winding up of the company’s activities as or on behalf of a person having an interest adverse to the company.” A majority member who routes company business to a related company it owns is the kind of conduct that duty addresses. The duty has a limit: under subdivision 5, “It is a defense to a claim under subdivision 2, clause (2), and any comparable claim in equity or at common law that the transaction was fair to the limited liability company.”

The management structure changes who owes what. Under subdivision 7, in a manager-managed LLC, “Subdivisions 1, 2, 3, and 5 apply to the manager or managers and not the members,” and “A member does not have any fiduciary duty to the company or to any other member solely by reason of being a member.” Subdivision 8 applies the same rule to governors in a board-managed LLC. A majority owner who is also the manager owes the fiduciary duties in that role. Subdivision 4 applies to every member, manager, and governor.

To enforce these duties yourself, Minn. Stat. § 322C.0901, subd. 1 provides that “a member may maintain a direct action against another member, a manager, a governor, or the limited liability company to enforce the member’s rights and otherwise protect the member’s interests.” Subdivision 2 adds a condition: the member “must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company.” A harm suffered only by the company goes through a derivative action instead. Under Minn. Stat. § 322C.0902, “A member may maintain a derivative action to enforce a right of a limited liability company” if the member first demands that the other members, the managers, or the board, depending on how the company is managed, “cause the company to bring an action to enforce the right” and they do not bring it “within a reasonable time,” or if “a demand under clause (1) would be futile.” Under Minn. Stat. § 322C.0903, subd. 1, a derivative action “may be maintained only by a person that is a member at the time the action is commenced and remains a member while the action continues.”

Your operating agreement can also cut back these duties. If not manifestly unreasonable, Minn. Stat. § 322C.0110, subd. 4 lets it “restrict or eliminate the duty” to account and the duties to refrain from adverse dealing and competition. Subdivision 7 lets it “eliminate or limit a member’s, manager’s, or governor’s liability to the limited liability company and members for money damages,” except for listed conduct such as a “breach of the duty of loyalty.” Its duty and exculpation sections call for a close read.

When does a freeze-out count as oppressive conduct in a Minnesota LLC?

A freeze-out counts as oppressive conduct under Minnesota’s LLC Act when those in control act in a way that is unfairly prejudicial to you because it frustrated an expectation. The expectation must have been reasonable and material, known to the other members or one they had reason to know of, and not contrary to the operating agreement. Inaction can qualify; a good-faith disagreement about the agreement does not by itself.

Minn. Stat. § 322C.0102, subd. 18 defines “oppressive” for a member’s court application. The conduct must come from those in control: “members in a member-managed limited liability company or who are otherwise in control of any limited liability company,” managers, or governors. It must affect you as a member, manager, or governor, or as “an employee of a limited liability company with 35 or fewer members.” It must be “unfairly prejudicial to the applicant member in a capacity listed in clause (2), because the conduct frustrated an expectation of the applicant member” that meets four conditions. The expectation:

  1. “is reasonable in light of the reasonable expectations of the other members”
  2. “was material to the applicant’s decision to become a member of the limited liability company or for a substantial time has been material during the member’s continuing membership”
  3. “was known to other members or that the other members had reason to know”
  4. “is not contrary to the operating agreement as applied consistently with the contractual obligation of good faith and fair dealing under section 322C.0409, subdivision 4.”

Paragraph (b) adds two rules. Conduct “includes words, action, inaction, and any combination of words, action, or inaction,” so a majority that simply stops paying you or stops inviting you to meetings has engaged in conduct. But conduct “is not oppressive solely by reason of a good faith disagreement as to the content, interpretation, or application of the company’s operating agreement.”

Because the test turns on what was expected and who knew it, evidence of those expectations is the core of the claim. I suggest gathering three things, because each matches an element of the definition:

  1. The emails, texts, offering materials, and meeting notes from when you joined or invested that show what you were promised, such as a management role, a salary, or a share of profits.
  2. Evidence that the other members knew of those expectations, such as their own messages or the company’s records of your role.
  3. A dated log of each change since then: removal from a role, loss of pay or distributions, and exclusion from information or decisions.

If you also lost a job in the company, my page on losing your job while you own part of the company covers that overlap.

How does a court-ordered buyout work for a Minnesota LLC member?

A Minnesota LLC member can apply to the district court for an order dissolving the company on the ground that those in control acted illegally or fraudulently, or acted oppressively in a way “directly harmful to the applicant.” The court may instead order a sale of a member’s interests for fair value. The operating agreement cannot vary the court’s power “to decree dissolution” on those grounds.

Minn. Stat. § 322C.0701, subd. 1, clause (5), allows dissolution “on application by a member” when “the managers, governors, or those members in control of the company” “have acted, are acting, or will act in a manner that is illegal or fraudulent,” or “have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the applicant.” Subdivision 2 is the buyout remedy: “the court may order a remedy other than dissolution, which may include the sale for fair value of all membership interests a member owns in a limited liability company to the limited liability company or one or more of the other members.” Under subdivision 3, the proceeding “must be brought in a court within the county in which the registered office of the limited liability company is located,” and members need not be parties “unless relief is sought against them personally.”

Two points follow from the text. The sale is of “all membership interests a member owns,” and the statute does not limit the buyer to the majority: the court may order a sale to the company or to other members. The statute also lets the court choose, so a buyout is a remedy the court may order, never one it must.

My research for this page found no published Minnesota appellate decision applying § 322C.0701. The closest published decision applied the older statutes. In Lund v. Lund, 924 N.W.2d 274 (Minn. App. 2019), decided under the corporate statute, § 302A.751, and Minnesota’s former LLC act, the Court of Appeals affirmed a court-ordered buyout of a minority owner’s interests in two family corporations and an LLC. The district court relied on documents going back decades that showed a shared understanding that her exit was being planned. The appellate court held that “Offering a single, partial redemption over a 20-year period when all parties understood that Kim would achieve complete liquidity established frustration of her reasonable expectations as a matter of law.” The ordered buyout called for a small cash down payment, with the rest in “subordinated, unsecured promissory notes” payable over 20 years. Chapter 322C now defines oppressive conduct with its own four-part expectation test, set out in the section above. For an exit you negotiate rather than litigate, my page on a negotiated buyout of a co-owner covers the deal terms.

Why is resigning from the LLC a risky first move?

Unless your operating agreement provides otherwise, resigning from a Minnesota LLC before the company terminates is a wrongful dissociation, which exposes you to damages and ends your management rights. The dissociation itself also “does not entitle the person to a distribution.” It also turns you from a member into a transferee, while the court’s oppression remedy is available “on application by a member.”

Under Minn. Stat. § 322C.0601, subd. 1, you have “the power to dissociate as a member at any time, rightfully or wrongfully.” Subdivision 2 makes a dissociation wrongful only in the cases it lists, and one of them is a dissociation that occurs before the company terminates where “the person withdraws as a member by express will.” Subdivision 3 makes a wrongful dissociator “liable to the limited liability company and, subject to section 322C.0901, to the other members for damages caused by the dissociation.”

The consequences of leaving are set by Minn. Stat. § 322C.0603, subd. 1: “the person’s right to participate as a member in the management and conduct of the company’s activities terminates,” and the transferable interest you owned immediately before dissociation is then “owned by the person solely as a transferee.” Under subdivision 2, leaving “does not of itself discharge the person from any debt, obligation, or other liability to the company or the other members that the person incurred while a member.” And under § 322C.0404, subdivision 2, “A person’s dissociation does not entitle the person to a distribution.”

The court remedy in § 322C.0701, subdivision 1, clause (5), is available “on application by a member.” These are default rules. Under Minn. Stat. § 322C.0110, subd. 2, “To the extent the operating agreement does not otherwise provide for a matter described in subdivision 1, this chapter governs the matter.” I suggest deciding whether to bring that application, and reading the operating agreement’s withdrawal and buyout terms, before you send any resignation, because a resignation changes your status from member to transferee under § 322C.0603. Subject only to a court order enforcing a charging order, Minn. Stat. § 322C.0112, subd. 2, provides that “an amendment to the operating agreement made after a person becomes a transferee or dissociated member is effective with regard to any debt, obligation, or other liability of the limited liability company or its members to the person in the person’s capacity as a transferee or dissociated member.”

How do you get the company’s records when you are shut out?

Your right to Minnesota LLC records depends on how the company is managed. In a member-managed LLC, a member may inspect material records on reasonable notice. In a manager-managed or board-managed LLC, a member must make a demand “in a record” stating a purpose, and the company must answer in a record within ten days.

  • Member-managed. Under Minn. Stat. § 322C.0410, subd. 1, “On reasonable notice, a member may inspect and copy during regular business hours, at a reasonable location specified by the company, any record maintained by the company regarding the company’s activities, financial condition, and other circumstances, to the extent the information is material to the member’s rights and duties under the operating agreement or this chapter.” The company must also furnish, without demand, material information it knows, “except to the extent the company can establish that it reasonably believes the member already knows the information.”
  • Manager-managed or board-managed. Under subdivision 2, a member may obtain information if “the member seeks the information for a purpose material to the member’s interest as a member,” “the member makes a demand in a record received by the company, describing with reasonable particularity the information sought and the purpose for seeking the information,” and “the information sought is directly connected to the member’s purpose.” The statute then provides: “Within ten days after receiving a demand pursuant to clause (2), item (ii), the company shall in a record inform the member that made the demand” what it will provide, when, and where, with reasons for anything it declines.
  • After you are out. Under subdivision 3, “a dissociated member may have access to information to which the person was entitled while a member if the information pertains to the period during which the person was a member, the person seeks the information in good faith, and the person satisfies the requirements imposed on a member by subdivision 2, clause (2).” Under subdivision 6, “The rights under this section do not extend to a person as transferee.”

A record, under Minn. Stat. § 322C.0102, subd. 22, “means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form,” so a letter or an email can serve. The company may impose reasonable confidentiality conditions, but under subdivision 7 of § 322C.0410, “the company has the burden of proving reasonableness.” I suggest making every demand in writing, naming the categories of records and your purpose (for example, valuing your interest or checking whether distributions were withheld), because the manager-managed standard turns on that description. My page on minority owners’ rights to company information covers demand letters in more detail.

Can the majority stop paying me distributions to squeeze me out?

Not from you alone, by default. Minn. Stat. § 322C.0404 requires distributions before dissolution and winding up to be “in equal shares among members and dissociated members,” except for transfers and charging orders. For LLCs formed before August 1, 2015, Minn. Stat. § 322C.1204 instead allocates them “in proportion to the value of the contributions of the members,” per the company’s required records. The operating agreement can change both. Unless it requires distributions, the company may stop them for everyone. Because conduct includes inaction, a cutoff can also be oppressive under the expectation test in Minn. Stat. § 322C.0102.

Can the other members add an expulsion clause to our operating agreement?

Not by majority vote, by default. Minn. Stat. § 322C.0407 permits amendment only with all members’ consent unless the agreement sets another vote. An amending majority must act “in a manner, in light of the operating agreement, that is honest, fair, and reasonable” (Minn. Stat. § 322C.0409). For pre-August 1, 2015 LLCs, absent contrary operating agreement or articles terms, Minn. Stat. § 322C.1204 preserves the former dissenters’ rights statute, letting a member dissent from a materially adverse articles amendment that “establishes or changes the conditions for or consequences of expulsion” for fair value, on notice filed before the vote.

What if there are only two members in the LLC?

Then the statute’s out-of-court route depends on one person. Minn. Stat. § 322C.0602 allows expulsion by the unanimous consent of the other members, and in a two-member company the other members are one member. That route still applies only on the grounds the statute lists, such as that “it is unlawful to carry on the company’s activities with the person as a member” or a transfer of all of your transferable interest. The operating agreement and court routes work the same way as in larger companies.

Do I still own my share of the company after I am expelled?

You keep the economic interest, but not as a member. Under Minn. Stat. § 322C.0603, your management right ends, and the transferable interest you owned immediately before dissociation is owned solely as a transferee. Before dissolution and winding up, that interest pays only if the company decides to make an interim distribution (Minn. Stat. § 322C.0404), so the operating agreement’s buyout terms are the first place to look. Under Minn. Stat. § 322C.0112, an amendment made after you dissociate “is effective with regard to any debt, obligation, or other liability” owed to you in that capacity.

Do I get paid automatically if I withdraw from the LLC?

No. Under Minn. Stat. § 322C.0404, dissociation does not entitle you to a distribution. Payment comes from the operating agreement’s buyout or redemption terms, which Minn. Stat. § 322C.0112 lets a later amendment change, or a negotiated sale. As a remedy other than dissolution, a court can order a sale for fair value to the company or to one or more of the other members under Minn. Stat. § 322C.0701, but the court acts “on application by a member,” and under Minn. Stat. § 322C.0603 a person who withdraws holds the interest “solely as a transferee.”

Can I sue the majority member personally?

Yes, if that member violated a right of yours and you have your own injury. Minn. Stat. § 322C.0901 allows a direct action against another member “to enforce the member’s rights,” but you must plead and prove an actual or threatened injury not solely the result of an injury to the company. In a manager-managed or board-managed LLC, Minn. Stat. § 322C.0409 provides that a member has no fiduciary duty to other members “solely by reason of being a member.” Members need not be parties to a Minn. Stat. § 322C.0701 proceeding unless relief is sought against them personally.

Your Options When a Majority Owner Wants You Out

A majority owner cannot expel you from a Minnesota LLC by majority vote unless your operating agreement allows it; the statute’s other routes require unanimous consent on narrow grounds or a court order the company requests. A merger the operating agreement lets the majority approve can also end your membership. A freeze-out is the other threat. Chapter 322C answers it with a member’s court application for dissolution when those in control act illegally or fraudulently, or oppressively in a way directly harmful to the applicant, and the court may order a fair-value sale instead. Before you respond, I suggest reading the operating agreement’s expulsion, amendment, merger, and buyout terms, demanding the records in writing, and holding off on any resignation, because each of those steps preserves an option the statute gives a member. This page sits within my ownership disputes practice. If a majority owner is moving to push you out, email [email protected] with a brief description, and I can start an intake and conflict check before you send the operating agreement or anything else confidential.