Owning part of a company is not the same as controlling it. Minority owners in Florida businesses often discover that the majority can cut off information, stop distributions, and run the company as if the minority owner does not exist.
That is not simply unfair. In many cases it is actionable.
The Law Offices of Aaron Resnick, P.A. has represented minority owners in Miami business disputes since 1998.
What a freeze-out actually looks like
It rarely arrives as a single dramatic event. It accumulates:
- Distributions stop, while the majority's salary goes up
- You are removed from the bank account, the email system, or the office
- Meetings happen without you, or stop happening at all
- Requests for financials go unanswered
- Company money starts flowing to entities the majority owns
- You receive a K-1 reporting income you never actually got
> The K-1 problem catches people every year. Being taxed on phantom income while receiving no distribution is one of the clearest signals that something is wrong, and it is often the first hard evidence a minority owner can point to.
You have a right to the books
Florida law gives owners inspection rights. Chapter 605 covers limited liability companies and Chapter 607 covers corporations, and both provide mechanisms for an owner to demand records.
This matters more than most people realize, because nearly every other claim depends on information you do not currently have. A properly drafted written demand is often the single most productive first step in a freeze-out case. It either produces the records, or it produces a refusal that becomes evidence.
Records worth demanding:
- Financial statements and general ledger
- Bank statements and canceled checks
- Tax returns and all K-1s
- Minutes, resolutions, and written consents
- Contracts with related parties
- Payroll and officer compensation records
- The current cap table and any transfer documents
Where the money usually goes
Freeze-outs are frequently accompanied by value being moved out of the company rather than stolen outright:
Related-party transactions. Company assets sold or leased to an entity the majority controls, at a price no independent buyer would accept.
Compensation as a substitute for distributions. If profits come out as the majority's salary instead of as distributions, the minority owner receives nothing while the majority is paid in full.
Dilution. A capital call or new issuance timed and priced so the minority owner cannot participate, shrinking their percentage. Whether this is permissible depends heavily on the governing document and on whether the majority followed its own procedures.
Transfers to affiliates. Property, customer lists, or contracts moved to a new entity, leaving the original company as an empty shell.
Direct claims and derivative claims
This distinction decides how a case is filed.
A direct claim belongs to you personally. Denial of inspection rights and denial of distributions owed to you are typically direct.
A derivative claim belongs to the company, brought by you on its behalf, because the wrongdoers are the ones who would otherwise decide whether to sue. Looting and self-dealing are usually derivative. Any recovery generally goes to the company, which benefits you in proportion to your ownership.
Getting this wrong is a common and expensive pleading error.
How these cases usually end
Most do not end with a trial. They end with the minority owner being bought out, and the real fight is over price.
Valuation is where the leverage lives. Expect disputes over whether a minority interest is discounted for lack of control and lack of marketability, over normalizing the majority's inflated compensation, and over whether diverted value gets added back before the multiple is applied. A forensic accountant is frequently necessary, and their work often changes the number substantially.
Common questions
Can my partner dilute my ownership percentage? Sometimes, and sometimes not. It depends on the operating or shareholder agreement, whether required notice and approval procedures were followed, and whether the transaction had a legitimate business purpose or existed solely to reduce your stake.
What if the financial statements I was given are fake? That escalates the matter considerably and opens fraud claims alongside the ownership claims. Preserve the documents exactly as received and note the date you received them.
What if the company stopped filing tax returns? That is both a compliance exposure for you and evidence of dysfunction. It also frequently signals that no one is producing reliable books at all.
Do I have to keep funding the company? Not necessarily, but refusing a capital call can have consequences under the governing document, including dilution. Read the document before you decline.
Start with the record
The strongest freeze-out cases are built on documents, not grievances. Before anything else, gather every version of the operating or shareholder agreement, every financial statement you have ever received, every K-1, and the written communications where you asked for information and were refused.
Call the Law Offices of Aaron Resnick, P.A. to discuss your rights as a minority owner.
