Dissociation of a Partner in a Healthcare Entity or Medical Practice

You’ve found yourself in a very common situation where one or more partners in your healthcare business (i.e. medical practice) wants to resign or dissociate from the entity. There could be any number of reasons that would motivate a person to do so. You may handle the personal fallout from this situation in any manner that you choose. However, there are still certain legal requirements that you must adhere to when a partner chooses to dissociate from a limited liability company.

Events Causing Dissociation

This is not an exhaustive list but a person is dissociated as a member if any of the following occur:

(1)  The company received notice of the person’s express will to withdraw as a member

(2)  An event stated in the operating agreement as causing the person’s dissociation occurs.

(3)  Person’s entire interest is transferred in a foreclosure sale.

(4)  The member is expelled pursuant to the operating agreement, by unanimous consent of the other members, or by judicial order.

(5)  Death or becomes incapable of performing their duties.

(6)  Becomes bankrupt, acquiesces in the appointment of a trustee, receiver or liquidator or the person or of substantially all of their property.

(7)  The company dissolves and completes winding up.

Statement of Dissociation

In order to dissociate from a limited liability company (“LLC”) you may file a statement of dissociation with the Florida Department of State’s Division of Corporations. (“Department) Your statement should: (a) list the name of the LLC; (b) name and signature of the dissociating member; (c) date the member withdrew or will withdraw; and (d) a statement that the company has been notified of the dissociation in writing. If you are the manager in a manager-managed LLC you may file a statement of resignation in the same manner.

Effect of Dissociation

If a person is dissociated as a member they lose their right to participate as a member in the management and conduct of the company’s activities and affairs. If the LLC is member-managed, the person’s duties and obligations as a member ends with regard to matters arising and events occurring after the person’s dissociation. A person’s dissociation as a member does not, of itself, discharge the person from a debt, obligation, or other liability to the company or the other members which the person incurred while a member.

Liability of Members and Managers

If you are dissociating from an LLC you should understand that any debt, obligation or other liability of the LLC is solely the debt, obligation or liability of the company. The dissociating member or manager is not personally liable, directly or indirectly for a debt, obligation or other liability of the company solely by reason of being or acting as a manager or member. This is true even if the company is dissolved.

A manager in a manager-managed LLC or a member in a member-managed LLC is not personally liable for monetary damages to the LLC, its members or any other person for any statement, vote, decision, or failure to act regarding management or policy decisions by either the manager or member unless: (a) the manager or member breached or failed to perform their duties: and (b) that breach or failure constitutes any of the following:

1.    A violation of criminal law unless the manager or member had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe that their conduct was unlawful.

2.    A transaction that caused the manager or member to receive an improper personal benefit, directly or indirectly.

3.    An improper distribution.

4.    The LLC procures a judgment in its favor on the basis that their was a conscious disregard for the best interest of the LLC, or willful misconduct.

5.    Someone other than a member or the LLC brings a successful cause of action based on recklessness or an act or omission that was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.

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It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please contact me using the contact information listed above.

All information and references made to laws, rules, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.