Dissolving a Tennessee LLC: Member Votes, Court Orders, Administrative Dissolution, and Winding Up

A Tennessee LLC can be dissolved in four main ways: by the members, by an event the LLC documents specify, by a court, or by the Secretary of State. Whichever way it happens, dissolution is only the start. The company then has to wind up its affairs, deal with creditors, distribute what is left, obtain a tax clearance, and file articles of termination. This article walks through each path and each step.

Which statute governs your LLC

The Tennessee Revised Limited Liability Company Act (Tenn. Code Ann. § 48-249-101 et seq.) applies to every Tennessee LLC formed on or after January 1, 2006, and to older LLCs that elected into it by amending their articles with the consent of all members (§ 48-249-1002). An LLC formed before 2006 that never elected in is still governed by the prior Tennessee Limited Liability Company Act, found in chapters 201 through 248 of Title 48. The court-ordered dissolution standard is worded nearly the same way in both acts (compare § 48-249-617 with Tenn. Code Ann. § 48-245-902), but other details differ. This article describes the Revised Act, so the first question for an older LLC is which act applies.

Dissolution, winding up, and termination are separate steps

Once a notice of dissolution is filed, the LLC must stop carrying on its business except as needed to wind up. Its existence continues for that purpose until the dissolution is revoked or articles of termination are filed (§ 48-249-609). When articles of termination are filed, the LLC's existence ends, but claims that existed before termination are not wiped out, and the LLC can still sue or be sued in its own name over them (§ 48-249-614).

What dissolves a Tennessee LLC

Under the Revised Act, an LLC is dissolved by the first of these to occur (§ 48-249-601):

• The end of a fixed period of duration stated in the articles.
• An event specified in the LLC documents, meaning the articles and any operating agreement.
• Action of the members.
• Action of the organizers, for an LLC that never accepted contributions (§ 48-249-602).
• A court order.
• Administrative dissolution by the Secretary of State.
• The loss of the last remaining member, but only if the LLC documents provide for dissolution in that event and a notice of dissolution is filed within 90 days. Otherwise, the last member's personal representative is substituted as a member and the LLC continues.

A member's withdrawal, death, incapacity, bankruptcy, expulsion, or other exit does not by itself dissolve the LLC (§ 48-249-601). The Court of Appeals described a dissolution event written into an operating agreement in Meadows v. Story (Tenn. Ct. App. 2022), where the agreement required dissolution upon the death of a member, so the company dissolved when one of its two members died.

Voluntary dissolution by the members

Members can dissolve the LLC under procedures in the LLC documents or under the default rules of the Act (§ 48-249-603). By default, dissolution is submitted at a meeting of members. Every member must receive notice, whether or not entitled to vote, and the notice must say that a purpose of the meeting is to consider dissolving the LLC and that dissolution will be followed by winding up and termination. Approval takes a majority vote or whatever other vote the LLC documents require.

Two default rules matter here. First, unless the LLC documents provide otherwise, each member has equal voting power per capita, regardless of ownership percentage (§ 48-249-405), and a majority vote on a per capita basis means a majority in number of the members entitled to vote (§ 48-249-102). Second, members can act without a meeting by written consent signed by members holding at least the votes that would be needed at a meeting where everyone voted. When the consent is less than unanimous, prompt notice must go to the members who did not sign (§ 48-249-405).

The Act lets the LLC documents change most of its rules, with a list of exceptions (§ 48-249-205). That is why the operating agreement is the first document to read. If it no longer matches how the company actually runs, see when the operating agreement no longer matches reality.

A member-approved dissolution can be revoked at any time before articles of termination are filed, generally by the same vote that approved it, by filing articles of revocation of dissolution (§ 48-249-613). The fee is $20 and the form is SS-4250.

Filing the notice of dissolution

After the members approve dissolution, or after a dissolution event in the LLC documents occurs, the LLC files a notice of dissolution with the Secretary of State (§ 48-249-609). The notice states the LLC's name and either that the required member vote was received or that the members validly acted without a meeting, or, for a dissolution event, a brief statement of the event and its date. The statutory filing fee is $20 (§ 48-249-1007), and the Secretary of State's form is the Notice of Dissolution (SS-4246). The Act also calls for a copy of the notice to be filed with the register of deeds in the county of the LLC's principal executive office if that office is in Tennessee, although failing to do so does not affect the notice's validity (§ 48-249-1007).

Winding up: collecting, paying, and distributing

Once the notice is filed, the members of a member-managed LLC, or the managers or directors of a manager-managed or director-managed LLC, must proceed as soon as possible to collect the debts owed to the LLC and to pay, or make provision for paying, the LLC's known debts (§ 48-249-610). In a manager-managed or director-managed LLC, the managers or board may sell all or substantially all of the assets of the dissolved LLC without a member vote.

A dissolved LLC must also pay, or make reasonable provision to pay, all claims and obligations known to it, including contingent, conditional, or unmatured ones (§ 48-249-620).

The Act sets the order of distribution (§ 48-249-620):

1. Creditors, including members who are creditors, to the extent the law permits.
2. Members, former members, and holders of financial rights, for distributions already owed to them.
3. Members and holders of financial rights, first to return contributions not previously returned, and then in the proportions in which they share in distributions.

Known contractual debts incurred during winding up must be paid or provided for before anything is distributed to members. If they are not, the creditor may pursue the members, directors, managers, or officers responsible for causing payment, and in some cases members who received distributions. That rule does not apply when a court supervises or orders the winding up (§ 48-249-620).

Known and unknown creditor claims

The Act offers two optional procedures that can cut off claims (§ 48-249-611).

• Known claims: the dissolved LLC may send each known claimant written notice that describes what a claim must include, says whether the claim is admitted, gives a mailing address, and sets a deadline at least four months after the notice is effective. A claim that is not admitted is barred if it is not received by the deadline. If the LLC rejects a claim in writing, the claim is barred unless the claimant sues within three months of the rejection notice. This procedure does not cover contingent liabilities or claims based on events after dissolution.
• Unknown claims: the LLC may publish notice once in a newspaper of general circulation in the county where its principal executive office is or was last located. Claims by claimants who did not receive written notice, claims that were timely sent but not acted on, and contingent or later-arising claims are then barred unless the claimant sues within two years after publication.

Claims that are not barred can be enforced against the LLC's undistributed assets or, if assets have been distributed, against a member or holder of financial rights up to that person's pro rata share of the claim or the amount distributed to that person, whichever is less. A member's total liability cannot exceed the total distributed to that member. If the LLC did not follow the notice procedures, a claim against a member who received a liquidating distribution cannot be enforced more than three years after articles of termination are filed (§ 48-249-611).

The tax clearance and articles of termination

When winding up is complete, the LLC files articles of termination stating its name, the date its articles of organization were filed, the reason for termination, whether known and potential creditors and claimants were notified under § 48-249-611, and any other information the filer wants to include (§ 48-249-612). The Secretary of State files them only if they are accompanied by a tax clearance for termination or withdrawal. The Act defines that clearance as confirmation from the Commissioner of Revenue that the LLC has filed all applicable reports, including a final report, and paid all fees, penalties, and taxes (§ 48-249-102). The statutory filing fee is $20 (§ 48-249-1007), and the form is Articles of Termination of Existence (SS-4245).

The Department of Revenue says a business must obtain a certificate of tax clearance before it can terminate its articles of organization with the Secretary of State, and that this requires filing a final franchise and excise tax return through the date of liquidation or the date the business stopped operating in Tennessee. The Department also states that the $100 minimum franchise tax applies to entities registered with the Secretary of State whether they are active or inactive. How the final returns are computed is a question for a CPA.

Court-ordered dissolution in a member dispute

A court may decree the dissolution, winding up, and termination of an LLC on application by the Attorney General or by or for a member, whenever it is not reasonably practicable to carry on the business in conformity with the LLC documents (§ 48-249-617). That is the only ground the Revised Act states. Section 48-249-616 separately says a court may grant equitable relief and may dissolve an LLC, but it lists no grounds of its own. Tennessee's LLC statutes do not list deadlock, oppression, fraud, or waste of assets as separate grounds. Facts like those matter to the extent they show the business cannot reasonably be carried on under the operating agreement. The Act does not define not reasonably practicable, and published Tennessee appellate guidance on how to apply it in a contested member dispute is limited, so how a court weighs particular facts is not settled.

For the facts that often lead here, see deadlock in a closely held business and owner dispute warning signs before the business stalls. When records or bank access are part of the dispute, see books, records, and account access as well.

The procedure has its own rules (§ 48-249-618):

• Venue is in the county where the LLC's principal executive office is or was last located. A proceeding by the Attorney General is brought in Davidson County.
• Members do not have to be made parties unless relief is sought against them individually.
• While the case is pending, the court may issue injunctions, appoint a receiver or custodian, take other action to preserve the LLC's assets, and carry on the business until a full hearing. A receiver winds up and liquidates; a custodian manages the business (§ 48-249-619).
• A member who petitions must file a bond, with sufficient surety, to cover the defendant's probable costs, including reasonable attorney fees. The court sets the amount and may award reasonable costs and attorney fees to the party it finds for.

The court has broad equitable power. It may grant any equitable relief it considers just and reasonable, may dissolve the LLC, or may direct a merger or other termination on terms it deems equitable (§ 48-249-616). In Owen v. Hutten (Tenn. Ct. App. 2013), the trial court dissolved a two-member LLC whose only investment was a house, ordered the house sold, returned one member's capital contribution first, and split any remaining proceeds equally. The Court of Appeals affirmed that result as within the trial court's discretion. In Meadows v. Story (Tenn. Ct. App. 2022), a receiver appointed in a dissolution case helped determine which disputed assets belonged to the LLC, and the court applied the statutory distribution order in light of the members' capital accounts.

A court-ordered dissolution takes effect when the decree becomes final and nonappealable, and the decree is filed with the Secretary of State as the notice of dissolution. A final decree of termination has the same effect as articles of termination (§ 48-249-617). The LLC documents may not vary the requirement to wind up after a court-ordered dissolution (§ 48-249-205).

Separately, after an event of dissolution and before articles of termination are filed, the LLC, or a member or creditor who shows good cause, may ask the court to supervise the winding up (§ 48-249-615).

Alternatives short of dissolution

Dissolution is not the only statutory tool in a member dispute. On application by the LLC or another member, a court can expel a member who engaged in wrongful conduct that adversely and materially affected the LLC's business, willfully or persistently committed a material breach of the LLC documents or of a duty owed under the Act, or whose conduct makes it not reasonably practicable to carry on the business with that member (§ 48-249-503). A member can also withdraw by written notice unless the LLC documents negate that power or another exception applies. A member who withdraws in violation of the LLC documents forfeits governance rights and is liable for damages, which can be offset against amounts the LLC owes that member (§ 48-249-504). When the business continues after a member's interest ends, the Act generally entitles that member to the fair value of the interest, subject to those offsets and to the LLC documents (§ 48-249-505). Whether the court's general equitable power under § 48-249-616 allows other alternatives, such as an ordered buyout, in a case where no member asked for expulsion is not clearly settled by Tennessee appellate decisions.

In Carbon Fiber Recycling, LLC v. Spahn (Tenn. Ct. App. 2025), the Court of Appeals held that an LLC's claims against a member, including its request to have him judicially expelled under § 48-249-503(a)(6), were subject to the arbitration provision in the operating agreement. The LLC documents cannot take away the right to seek judicial expulsion (§ 48-249-205).

Administrative dissolution by the Secretary of State

The Secretary of State may begin administrative dissolution if, among other grounds, the LLC (§ 48-249-604):

• Does not deliver its annual report within two months after it is due.
• Is without a registered agent or registered office in Tennessee for two months or more.
• Does not notify the Secretary of State within two months that its registered agent or office changed, the agent resigned, or the office was discontinued.
• Pays a filing fee with a check or other instrument that is dishonored.
• Files a document signed by someone who knew it contained materially false information.
• Is owned or controlled by a foreign government or other person that the U.S. Secretary of Commerce has determined to be a foreign adversary, unless the transaction was approved by the Committee on Foreign Investment in the United States (§ 48-249-604, as amended by 2025 Tenn. Pub. Acts ch. 113).
• Reaches the end of a fixed period of duration stated in its articles.

The annual report is due on or before the first day of the fourth month after the close of the LLC's fiscal year, or on a date set by rule (§ 48-249-1017). The Secretary of State first sends written notice of the grounds. If the LLC does not correct them, or show they do not exist, within two months, the Secretary of State signs a certificate of dissolution (§ 48-249-605). The administratively dissolved LLC still exists, but it may carry on only the business needed to wind up, liquidate, and notify claimants. Its registered agent's authority continues. The Department of Revenue says the franchise and excise tax return and the $100 minimum tax are still required even if a charter has been forfeited, revoked, or suspended without being properly dissolved or terminated. Property taxes are a separate exposure. Each person who owns an interest in an LLC or similar limited liability entity that is inactive, dissolved, revoked, or otherwise terminated, or is shown that way in the Secretary of State's records, is jointly and severally liable with the entity for unpaid property taxes on parcels assessed to it, along with interest, attorney fees, and court costs (Tenn. Code Ann. § 67-5-2101(c), as added by 2024 Tenn. Pub. Acts ch. 967).

Reinstatement, or terminating without reinstating

An administratively dissolved LLC can apply for reinstatement (§ 48-249-606). The application must include a confirmation of good standing, which the Act defines as confirmation from the Commissioner of Revenue that the LLC is current on all taxes and penalties (§ 48-249-102). It must also state the LLC's name, state that the grounds for dissolution did not exist or have been eliminated, and give a name that meets the Act's requirements. Once granted, reinstatement relates back to the date of the administrative dissolution, and the LLC resumes business as if the dissolution never happened. The statutory fee is $70 (§ 48-249-1007), and the form is the Application for Reinstatement Following Administrative Dissolution/Revocation (SS-9410). If reinstatement is denied, the LLC may appeal to the Davidson County Chancery Court within 30 days after service of the denial notice (§ 48-249-607). An LLC dissolved because its period of duration expired may reinstate within one year by amending its articles to extend the period or make it perpetual and applying for reinstatement (§ 48-249-623).

An LLC that wants to close instead can file articles of termination following administrative dissolution without first being reinstated. Those articles state, among other things, that the members adopted a resolution authorizing termination and that all assets have been distributed. They also require a tax clearance for termination or withdrawal (§ 48-249-608). The statutory fee is $100 (§ 48-249-1007), and the form is Articles of Termination Following Administrative Dissolution (SS-4243).

Every dissolution depends on the operating agreement, the members, the creditors, and what is actually in dispute. If you are closing or contesting an LLC in Middle Tennessee, my office can review the operating agreement and the options with you.

Educational disclaimer: This article provides general Tennessee educational information only and is not legal or tax advice for any specific company or dispute.