Lucifer (Satan) and those who chose to follow him were cast out of heaven and denied the opportunity to have physical bodies.
7 And there was war in heaven: Michael and his angels fought against the dragon; and the dragon fought and his angels,
8 And prevailed not; neither was their place found any more in heaven.
9 And the great dragon was cast out, that old serpent, called the Devil, and Satan, which deceiveth the whole world: he was cast out into the earth, and his angels were cast out with him.
The Prophet Joseph Smith said:
“The contention in heaven was—Jesus said there would be certain souls that would not be saved; and the devil said he would save them all, and laid his plans before the grand council, who gave their vote in favor of Jesus Christ. So the devil rose up in rebellion against God, and was cast down, with all who put up their heads for him.”
(Teachings of Presidents of the Church: Joseph Smith , 209.)