2025 Session Last amended: 2015 session

§ 322C.0404 — Sharing of and Right to Distributions Before Dissolution

Plain-Language Summary

Before an LLC dissolves, any distributions to members must be made in equal shares unless the operating agreement says otherwise or a transfer or charging order changes the allocation. Members do not have an automatic right to receive distributions; the LLC must decide to make them. Distributions must be in cash unless the asset is fungible.

Subdivision 1.Equal distributions.

Subject to section 322C.1204, subdivision 3, clause (3), items (i) through (iv), any distributions made by a limited liability company before its dissolution and winding up must be in equal shares among members and dissociated members, except to the extent necessary to comply with any transfer effective under section 322C.0502 and any charging order in effect under section 322C.0503. §

Subd. 2.Interim distributions.

A person has a right to a distribution before the dissolution and winding up of a limited liability company only if the company decides to make an interim distribution. A person’s dissociation does not entitle the person to a distribution. §

Subd. 3.Form of distributions.

A person does not have a right to demand or receive a distribution from a limited liability company in any form other than money. Except as otherwise provided in section 322C.0707, subdivision 3, a limited liability company may distribute an asset in kind if each part of the asset is fungible with each other part and each person receives a percentage of the asset equal in value to the person’s share of distributions. §

Subd. 4.Parity with creditors.

If a member or transferee becomes entitled to receive a distribution, the member or transferee has the status of, and is entitled to all remedies available to, a creditor of the limited liability company with respect to the distribution.

History:

2014 c 157 art 1 s 33; 2015 c 39 s 32

History: History: 2014 c 157 art 1 s 33; 2015 c 39 s 32

Practical Notes

When this applies: When an LLC is deciding whether and how to distribute profits or assets to members during the LLC’s ongoing operations. Who this affects: LLC members, dissociated members, and transferees. Key points: The default rule is equal distributions, but almost all multi-member LLCs should address this in the operating agreement to set different allocation percentages. A member cannot demand a distribution; the LLC (through its members or managers) must affirmatively decide to distribute funds. Once a distribution is authorized, the member has creditor-like rights to collect it. Distributions must be in money unless the asset can be divided equally.

Source: Minnesota Office of the Revisor of Statutes