The call usually sounds the same. Two or three people started a company. It worked. Then the person with the login credentials and the checkbook stopped returning calls, stopped making distributions, put a relative on payroll, and — when asked — offered to buy the other member out for a number that is not serious.
There is no fraud anyone can point to. Nothing was stolen in a way that would interest a prosecutor. The minority member simply has an asset they cannot access, cannot value, and cannot sell.
Minnesota has a statute for exactly this. It is Minn. Stat. § 322C.0701, and the remedy most people do not know about is the one that actually solves the problem.
What does Minn. Stat. § 322C.0701 allow?
It allows a member of a Minnesota LLC to petition a court for dissolution — or, more usefully, for something short of dissolution.
Under subdivision 1, clause (5), a member may seek relief 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.”
That second ground is the one that matters in most real disputes. You do not have to prove fraud. You have to prove oppression that is directly harmful to you — and the freeze-out pattern above is what the word describes.
The remedy that matters: a court-ordered buyout
Subdivision 2 is the provision worth reading twice. A court is not limited to dissolving the company. It may instead order “a remedy other than dissolution, which may include the sale for fair value of all membership interests a member owns . . . to the limited liability company or one or more of the other members.”
The court may order an alternative remedy “in any case where that remedy would be appropriate under all the facts and circumstances of the case.”
Understand what this means strategically. The minority member’s problem is almost never that they want the company destroyed. It is that they own something illiquid that the majority controls, and the majority has no incentive to pay a real price for it. Section 322C.0701 supplies that incentive: a court can compel the purchase, and the statute measures the price at fair value rather than whatever was offered.
That reframes the entire negotiation. A majority member who was content to wait out a frozen-out partner indefinitely now faces the prospect of a court determining fair value on a record the majority does not control.
Two honest qualifications. The remedy is discretionary — subdivision 2 says the court “may order a remedy other than dissolution, which may include” a sale at fair value. It is relief you have to earn on the facts. And § 322C.0701 is a thinner provision than its corporate counterpart: unlike Minn. Stat. § 302A.751, subd. 2, it supplies no valuation date, no deadline for the parties to agree on price, and no cross-reference to a statutory fair-value procedure. Those gaps get litigated.
What counts as “oppressive”?
Oppression is deliberately not defined by a checklist, because the conduct is endlessly inventive. The recurring patterns:
- Termination of employment where the member’s compensation was the practical return on the investment
- Elimination of distributions while the majority takes salary, bonuses, or “consulting fees”
- Exclusion from information — no financials, no access to books, no answers
- Removal from management contrary to the parties’ original understanding
- Related-party dealing — leases, service contracts, or payroll for insiders on non-market terms
- Dilution through capital calls timed so the minority cannot participate
- Lowball buyout offers presented as the only exit
The through-line is that the majority is extracting the company’s value through channels the minority cannot reach, while the minority’s interest generates nothing.
Where is the case filed?
Venue is in the county where the LLC maintains its registered office. Subdivision 3 also provides that other members need not be named as parties unless personal relief is sought against them — a detail that matters when you are deciding how aggressive the pleading should be.
Read your operating agreement first
This is the step that most often changes the answer, and it comes before the statute.
Minnesota’s LLC act is largely default law. A well-drafted operating agreement may already contain:
- A buy-sell provision with a defined valuation method and trigger events
- A deadlock mechanism — shotgun clauses, appraisal, mandatory mediation
- Distribution obligations that convert “no distributions” from a grievance into a breach of contract
- Information rights beyond the statutory baseline
- Transfer restrictions that determine whether you can sell to a third party at all
If a buy-sell exists and the trigger has occurred, the contract claim is frequently faster and cheaper than the statutory petition. If the operating agreement is silent — or if there is no operating agreement, which is common — § 322C.0701 is the path.
A caution that goes the other way — with a large exception. An operating agreement can limit your options: transfer restrictions that decide whether you may sell at all, a contractual buy-sell price you are stuck with, deadlock procedures you have to run before you do anything else. Read it before you assume you can proceed the way you want to.
But it cannot take the § 322C.0701 petition away from you. Minn. Stat. § 322C.0110, subd. 3, lists what an operating agreement may not do, and clause (7) is directly on point:
“An operating agreement may not: . . . (7) vary the power of a court to decree dissolution in the circumstances specified in section 322C.0701, subdivision 1, clauses (4) and (5).”
Clause (5) is the illegal, fraudulent, or oppressive conduct ground this entire article is about. It is not waivable. Two neighboring restrictions in the same subdivision matter just as much:
- An operating agreement may not “unreasonably restrict the duties and rights stated in section 322C.0410” — the information rights below. § 322C.0110, subd. 3(6).
- It may not “unreasonably restrict the right of a member to maintain an action under sections 322C.0901 to 322C.0906.” § 322C.0110, subd. 3(9).
So the operating agreement shapes the fight — what you can sell, at what price, and what you have to do first. It does not end it.
What a member should do before filing
The evidence you will need is evidence the other side controls, and their incentive to preserve it declines the moment they know you are serious.
- Make the books-and-records demand in a record, and make it specific. Minnesota LLC members have statutory information rights under Minn. Stat. § 322C.0410, and in a manager-managed or board-managed company the written demand is not merely good practice — it is the statutory prerequisite. Subdivision 2(2) conditions the right on a member who “makes a demand in a record received by the company, describing with reasonable particularity the information sought and the purpose for seeking the information.” Subdivision 2(3) then gives the company ten days: within ten days it “shall in a record inform the member” what it will provide and when and where, or state “the company’s reasons for declining.” A proper demand does two things — it may get you the financials, and a refusal or a silent eleventh day is itself evidence.
- Document the pattern, with dates. Oppression is a course of conduct, not a single act. The chronology is the case.
- Preserve your own records now. Emails, texts, the original operating agreement, capital contribution records, distribution history, tax returns and K-1s.
- Do not resign, and do not sign anything. Resigning from employment or management can weaken your position materially. So can a release buried in a routine-looking document.
- Get an independent view of value before you negotiate. The majority’s number is an opening position, not an appraisal.
- Watch the clock. Claims have limitations periods, and delay also undercuts the equitable posture that a court-ordered buyout depends on.
If you are the majority member
The same statute is worth reading from your side, because the exposure is asymmetric and the defenses are largely built in advance.
- Pay distributions consistently or document a legitimate business reason not to.
- Keep related-party transactions at market terms, documented and approved.
- Honor information requests, and honor the clock. A proper demand under § 322C.0410, subd. 2, obligates a manager-managed or board-managed company to respond in a record within ten days. Stonewalling is the single most persuasive evidence of oppression, and it is free to avoid.
- Get a real operating agreement with a real buy-sell. A defined valuation mechanism protects the majority at least as much as the minority, because it replaces a court’s fair-value determination with the parties’ own.
- Take a serious buyout position early. The cheapest resolution of a § 322C.0701 case is the one that happens before it is filed.
Why this comes up so often in Minnesota
Minnesota’s economy is thick with closely held companies — contractors, manufacturers, professional practices, distributors, family real estate holdings — formed by people who trusted each other and used a form document, or none. The LLC became the default entity, and the operating agreement became the thing everyone meant to finish later.
Those companies work well for years. What they lack is a mechanism for the moment one owner wants out and the others do not want to pay. Section 322C.0701 is the legislature’s answer to that moment, and its most important feature is that the exit does not require killing the business.
Madgett Law, LLC represents Minnesota LLC members on both sides of ownership disputes — freeze-outs, buyout valuation, deadlock, and the business-divorce negotiation that precedes litigation. If you are locked out of a company you own a piece of, or you are the operator facing a claim, send us a message or call 612-470-6529.
Sources: Minn. Stat. § 322C.0701 (events causing dissolution; grounds on application by a member; alternative remedies including sale for fair value; venue and parties); Minn. Stat. § 322C.0110, subds. 1–3 (operating agreement — scope, function, and limitations; restrictions, including clauses (6), (7), and (9)); Minn. Stat. § 322C.0410, subd. 2 (member information rights in a manager-managed or board-managed company; demand in a record; ten-day response); Minn. Stat. ch. 322C generally (Minnesota Revised Uniform Limited Liability Company Act) (Minnesota Office of the Revisor of Statutes). This article is general legal information about Minnesota law, not legal advice, and reading it does not create an attorney–client relationship. Available remedies depend on the operating agreement, the entity’s history, and the specific conduct at issue. No outcome is promised or implied.