When a member leaves, Minnesota does not buy them out

By David J.S. Madgett

Minnesota attorney, license no. 390494 · Published August 7, 2026

Two founders start a company. Three years in, one wants out. Everyone assumes the company buys back their interest at some fair number and they go their separate ways.

Chapter 322C does not provide for that. What it provides is considerably stranger, and worse for both sides.

What dissociation actually does

Minn. Stat. § 322C.0603:

• “the person’s right to participate as a member in the management and conduct of the company’s activities terminates”;
• the person holds their transferable interest “solely as a transferee”; and
• dissociation “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.”

There is no automatic buyout. No redemption, no appraisal, no payment. The statute simply changes what they are.

The outcome nobody wants

Combine that with § 322C.0502, which sets out what a transferee gets: distributions, and nothing else. No management, no vote, no right to company records.

So the departing member ends up holding a permanent claim on distributions, with no say in whether distributions are ever made and no right to see the books that would tell them whether the company can afford one.

And remember § 322C.0404, subd. 2: a person has a right to a distribution before dissolution only if the company decides to make an interim distribution. The people who decide are the remaining members.

Look at the position from each side.

The departed member cannot get paid, cannot vote, cannot inspect records, and cannot force a sale. Their capital is stranded indefinitely in a business run entirely by someone else.

The remaining members have a permanent silent claimant on every dollar they distribute. Any distribution to themselves triggers a proportionate obligation to someone who no longer contributes anything. The practical effect is a strong incentive never to distribute — which is its own distortion, and which starts to look like the kind of conduct that supports a judicial dissolution petition.

Nobody designed this. It is just what happens when the operating agreement is silent.

What the agreement should say instead

This is the second-most-valuable section of an operating agreement, after the one on how money is split. At minimum:

A buy-sell trigger list. Voluntary withdrawal, death, disability, divorce, bankruptcy, loss of a required professional license, termination of employment. Decide which of these force a purchase and which merely permit one.

A valuation method, chosen in advance. A formula (a multiple of trailing revenue or EBITDA), a fixed price updated annually by written agreement, or a defined appraisal process with a mechanism for picking the appraiser. Pick one now. Agreeing on a valuation method after someone has announced they are leaving is close to impossible, because by then everyone knows which method favors them.

Payment terms. Very few small businesses can write a lump-sum check for a departing owner’s share. Say so: a promissory note over three or five years, a stated interest rate, and what happens on default. A buyout obligation the company cannot fund is not a solution.

Whether the departing person keeps voting. Under the default they do not — but a badly-drafted agreement can accidentally leave them in.

A transfer restriction, so the interest cannot be sold to a stranger while all this plays out. See what the default permits.

If you are already in this position

If a member has already dissociated with no agreement in place, the options are negotiation, or the remedies in §§ 322C.1001–322C.1015 and the judicial routes under § 322C.0701 — where a court may order alternative remedies including a purchase of the member’s interest. Those are real but expensive paths, and which one fits depends heavily on the facts.

The unhappy truth is that this is the cheapest problem in business law to prevent and one of the most expensive to solve. Two paragraphs at formation, or a lawsuit later.