In a two-member LLC that is deadlocked, when is judicial dissolution appropriate?

• A. Yes, when deadlock prevents operation and no other remedy is effective
• B. Only if the buyout provision is triggered
• C. Only if one member defaults on capital calls
• D. When there is a unanimous consent to dissolve

Answer: (A)

Judicial dissolution is appropriate when a deadlock effectively stops the business from operating and no other workable remedy exists. In a two-member LLC, the lack of a majority to make decisions means a persistent deadlock can freeze operations. If there are no viable alternatives—such as a functioning buyout provision, a path to break the tie through mediation or arbitration, or a feasible buy-sell arrangement—and the LLC cannot be run in its current state, a court may dissolve it and wind up its affairs. This is distinct from voluntary dissolution by unanimous consent, which is a mutual agreement by the members and does not involve a court. It’s also not limited to specific triggers like capital-call defaults; those are contract mechanisms, not the deciding factor for court-ordered dissolution. The key idea is that dissolution via the court is warranted only when deadlock prevents operation and no effective remedy remains.