LLC Distribution Limits and Improper-Distribution Liability in Alaska

At a glance

Requirements one by one

Alaska uses two tests with an agreement-sensitive preference add-on

Alaska Stat. § 10.50.990(8)-(9) separates an interim distribution from a § 10.50.425 winding-up distribution and defines knowledge to include actual knowledge or other facts demonstrating bad faith in the circumstances.

Alaska Stat. § 10.50.305(a) bars a distribution if the LLC could not pay debts as they become due in the usual course or assets would fall below liabilities plus superior member dissolution preferences. The operating agreement may remove the preference amount from the second test; it does not remove the debts-as-due test or liabilities floor.

Reasonable statements, fair valuation, or another reasonable method may be used

Under § 10.50.305(b), the LLC may rely on financial statements prepared using reasonable accounting practices and principles, fair valuation, or another reasonable method. This page does not select or apply a method.

The ordinary rule measures authorization if payment follows within 120 days and payment if later. Alaska states no separate acquisition or other-debt issuance date. Each payment on debt issued as a distribution is retested when actually paid.

Conditional debt is excluded, but parity is unstated

Section 10.50.305(d) excludes debt payable only if and to the extent a member distribution could then be made. Its text cross-references determinations under subsection (b), and this page preserves that cross-reference rather than silently rewriting it. The surveyed provisions state no distribution-debt parity, secured status, or subordination rule.

Knowing-recipient liability is creditor- and member-facing

Alaska Stat. § 10.50.320(a) makes a member who received a prohibited distribution with knowledge of facts indicating impropriety liable for the amount received plus interest at the legal judgment rate until paid. Liability cannot exceed company liabilities owed to nonconsenting creditors at the time of violation plus injury to nonconsenting members.

Qualifying creditors whose claims arose before the distribution and qualifying holders of preferred interests may sue in the company's name under subsection (b). A member defendant may compel contribution from every other liable member. The section preserves other-applicable-law liability but states no separate claim against a member or manager merely for authorizing the payment.

No special prohibited-distribution period is stated

Sections 10.50.305 through 10.50.320 state no special limitation or repose period, accrual rule, or dissolution extension for this recovery. This page does not substitute an uncited general civil limitations period.

Winding up follows a separate priority order

Alaska Stat. § 10.50.425 first pays or adequately provides for creditors, then addresses company liabilities for distributions under §§ 10.50.295 through 10.50.330, returns contributions, and allocates the residual by predissolution distribution rights, subject to the agreement where stated.

What trips people up

• The recipient measure includes interest and two caps. It is not simply a strict return of the distribution or its unlawful excess.
• Standing is specified. The statute identifies nonconsenting pre- distribution creditors and nonconsenting preferred-interest members.
• The conditional-debt cross-reference is unusual. Section 10.50.305(d) names determinations under subsection (b) as written.

Common questions

Is a manager directly liable under the distribution section for approval?

Sections 10.50.305 through 10.50.320 do not state a separate authorizer claim. The express statutory claim concerns a knowing member-recipient.

May the articles or agreement add redemption restrictions?

Yes. Alaska Stat. § 10.50.315 expressly permits additional restrictions on the LLC's purchase or redemption of its own interests.

Can one liable member seek contribution?

Yes. Section 10.50.320(c) permits a sued member to compel contribution from all other members liable under that section.

Statutes and sources

• Alaska Stat. §§ 10.50.305 and 10.50.315 — state the financial tests, valuation, timing, conditional-debt rule, and added redemption restrictions.
• Alaska Stat. § 10.50.320 — states knowing-recipient liability, interest, caps, plaintiffs, company-name procedure, contribution, and other-law boundary.
• Alaska Stat. §§ 10.50.425 and 10.50.990 — state the winding-up order and define interim distribution and knowledge.

All quoted sections are in the official current Chapter 10.50 print range (accessed September 19, 2026).