The most expensive sentence in chapter 322C is one nobody reads

By David J.S. Madgett

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

Business disputes between co-owners rarely start with anyone behaving badly. They start with two people who agreed on something in a coffee shop, wrote none of it down, and then discovered years later that the statute had been quietly supplying different terms the whole time.

In Minnesota, the sentence doing that work is Minn. Stat. § 322C.0404, subd. 1:

Any distributions made by a limited liability company before its dissolution and winding up must be in equal shares among members.

Equal shares among members. Not proportional to capital, not proportional to ownership percentage, not proportional to anything.

The shape of the problem

The recurring fact pattern is easy to describe. One person funds most of the company. Another contributes labor, or a customer list, or simply showed up first. They agree on a split — 80/20, 70/30, 90/10 — and everyone genuinely means it. Nobody papers it, because papering it feels like distrust at exactly the moment when trust is the point.

Then the company makes money.

The member who put in less reads the statute, or hears about it, and discovers that the default is an even split. They are not being opportunistic; they are reading a statute that says what it says. The member who funded the company is now arguing about an oral agreement against a written rule, which is a materially worse position than the one they thought they were in.

The same structure repeats with voting. Section 322C.0407, subd. 2 gives each member equal rights in management — one member, one vote, regardless of percentage. The 90% owner and the 10% owner have identical say in the ordinary course, and anything outside the ordinary course requires unanimity, which hands every member a permanent veto.

Stack the two together and a minority member can block extraordinary decisions while a majority-in-name owner cannot force ordinary ones, and neither can compel a distribution at all, because subdivision 2 says a member has a right to a distribution before dissolution “only if the company decides to make an interim distribution.”

That is not a drafting accident in the statute. It is a coherent set of defaults for a closely held business where the drafters assumed everyone contributed comparably. It is just not what the parties in front of it usually intended.

What makes it expensive

Not the legal fees, though those are real. What makes it expensive is that the argument arrives at the worst possible time — when there is finally money to distribute, or when someone wants out, or when a buyer is doing diligence and finds no operating agreement. The company is worth the most it has ever been worth, and its governance is least settled.

The fix costs nothing

Two paragraphs, agreed in advance, when everyone still likes each other:

1. How money is split. State it in proportion to ownership percentage, or in whatever proportion you actually agreed, and say explicitly that it varies § 322C.0404.
2. How decisions get made. State whether votes follow percentage or headcount, what counts as ordinary course, and what genuinely requires unanimity.

Everything else in an operating agreement is useful. Those two are the ones that keep people out of court.

The operating agreement builder drafts both, and shows the statutory default beside each choice so it is obvious what is being changed. A longer treatment of the rest of the defaults is in what Minnesota law does if your operating agreement is silent.