LLC Distribution Limits and Improper-Distribution Liability in Kansas
At a glance
| Governing law, entity, distribution, and winding-up scope | Kansas Revised LLC Act; §§ 17-76,104-.110 govern interim/member distributions. Winding up separately pays or provides for claims, orders remaining assets, and imposes a parallel knowing-recipient rule (§ 17-76,119) |
|---|---|
| Ordinary-course debt-payment and insolvency test | No separate debts-as-they-become-due or insolvency test in § 17-76,110; the statutory financial limit is the at-distribution fair-value asset-liability test |
| Assets, liabilities, preferences, fair value, and exclusions | Bar to extent post-distribution liabilities exceed fair value of assets; exclude member-interest and limited-recourse liabilities, count encumbered property only by excess fair value, and exclude reasonable service compensation and bona fide ordinary-course benefit payments; no superior-preference add-on (§ 17-76,110(a)) |
| Accounting statements, valuation methods, and decision date | § 17-76,110 states fair value and measures at distribution after giving effect; no accounting-statement, projection, reliance, or alternative-method rule stated |
| Authorization, payment, redemption, debt, and delayed-payment measurement | Test applies at distribution after giving effect; §§ 17-76,104-.110 state no separate authorization, 120-day delay, redemption, interest-acquisition, distribution-debt, or payment-by-payment measurement rule. Agreement may set a record date (§ 17-76,109) |
| Conditional distribution debt, creditor status, parity, and subordination | Entitled member has default creditor status/remedies subject to §§ 17-76,110 and -119 and the operating agreement; no conditional-debt exclusion, payment retest, parity, security, or subordination rule stated (§ 17-76,109) |
| Authorizer, standard, and liability to the company | §§ 17-76,110 and -119 state recipient liability, not a separate manager/member authorizer claim, standard, or amount; operating agreement controls interim-distribution extent, times, or events (§ 17-76,104) |
| Recipient knowledge, return amount, defenses, and contribution | Knowing member owes LLC the full distribution; unknowing member owes nothing under the recipient rules. Agreement/other-law obligations preserved subject to the agreement-qualified cutoff; no contribution/impleader rule stated (§§ 17-76,110(b), 17-76,119(c)-(d)) |
| Limitation or repose period, accrual, and survival | Unless otherwise agreed, no member liability under Act/other law for distribution amount after 3 years from distribution unless a recovery action starts before expiry and adjudicates liability; parallel ordinary and winding-up rules (§§ 17-76,110(c), 17-76,119(d)) |
| Tax, fiduciary, transfer, bankruptcy, creditor, and calculation boundaries | Agreement/other-law recipient obligations preserved subject to cutoff; operating agreement may alter duties/liability but not bad-faith implied-covenant liability. No solvency calculation, fair-value or knowledge finding, creditor-standing conclusion, tax, transfer, or bankruptcy result here (§§ 17-76,110, 17-76,119, 17-76,134) |
Requirements one by one
Kansas uses one fair-value asset-liability test
K.S.A. § 17-76,110(a) bars a member distribution to the extent that, after giving effect to it, specified liabilities exceed the fair value of LLC assets. It excludes liabilities to members on their LLC interests and limited-recourse liabilities. Property securing limited-recourse debt counts only to the extent its fair value exceeds that debt.
The same subsection excludes reasonable compensation for present or past services and reasonable ordinary-course payments under a bona fide retirement plan or other benefits program from “distribution.” It states no additional debts-as-they-become-due test or superior-liquidation-preference amount.
The statutory measurement time is the distribution itself
Section 17-76,110 measures “at the time of the distribution, after giving effect to the distribution.” It uses fair value but supplies no accounting-statement, projection, reliance, or alternative-method menu and no separate rule for an authorization, redemption, distributed debt, delayed payment, or payment-by- payment retest.
Under § 17-76,109, an entitled member has default creditor status and remedies for the distribution, subject to the operating agreement and §§ 17-76,110 and 17-76,119. That creditor status does not itself state parity, security, or priority, and the statute states no conditional-distribution-debt exclusion.
Recipient liability turns on knowledge
Under § 17-76,110(b), a member who knew at distribution that the payment violated subsection (a) is liable to the LLC for the amount of the distribution. An unknowing member is not liable for that amount under the subsection. The section preserves agreement and other-applicable-law obligations subject to its cutoff, but it states no separate authorizer-liability or contribution rule.
The three-year sentence requires action and adjudication
Unless otherwise agreed, § 17-76,110(c) removes a member's Act-or-other-law liability for the distribution amount after three years from the distribution unless a recovery action was commenced before expiration and an adjudication of liability is made in that action. Filing alone is therefore not all the text requires.
Winding up uses a separate order and parallel recovery rule
K.S.A. § 17-76,119(a) first pays or provides for creditors other than identified distribution liabilities, then addresses member and former-member distribution liabilities, and finally distributes remaining assets as the operating agreement or statutory order provides. Subsections (c) and (d) repeat the knowledge-based recipient duty, compensation-and-benefit exclusion, and agreement-qualified three-year action-plus-adjudication cutoff for distributions covered by the winding-up section.
What trips people up
- This is not the common two-test formula. Section 17-76,110 contains the fair-value balance-sheet ceiling but no separate ordinary-course debt-payment test.
- The recipient measure is the whole distribution. The knowing-member rule says “the amount of the distribution,” not only an expressly stated unlawful excess.
- The cutoff has two procedural conditions. A recovery action must begin in time and must produce an adjudication of liability.
Common questions
Who controls the timing of an interim distribution?
Subject to §§ 17-76,104 through 17-76,110, § 17-76,104 looks to the operating agreement for the extent, times, or events before resignation and before dissolution and winding up.
Is a manager automatically liable for approving an improper distribution?
Sections 17-76,110 and 17-76,119 place their express recovery duty on a member who receives the distribution with the required knowledge. Those sections do not state a separate manager/member authorizer claim, standard, or liability amount.
Can the operating agreement alter duties or liabilities?
K.S.A. § 17-76,134(b)-(e) gives operating agreements broad effect over duties and liability, but it does not permit elimination of the implied contractual covenant of good faith and fair dealing or liability for a bad-faith violation of that covenant. Applying those separate rules to particular conduct is outside this survey.
Statutes and sources
- K.S.A. § 17-7662 — identifies the current Kansas Revised Limited Liability Company Act. Official current text (accessed September 19, 2026).
- K.S.A. §§ 17-76,104, 17-76,109, and 17-76,110 — state interim entitlement, creditor status, the financial ceiling, recipient liability, and the special cutoff. Official § 17-76,104, § 17-76,109, and § 17-76,110 (accessed September 19, 2026).
- K.S.A. § 17-76,119 — supplies the winding-up order and parallel recipient recovery and cutoff rules. Official current text (accessed September 19, 2026).
- K.S.A. § 17-76,134(b)-(e) — states the operating-agreement policy and duty/liability boundaries. Official current text (accessed September 19, 2026).
Source links
Every statute quoted above, linked, with the date we checked it.
What does Kansas law mean for your facts?
You just read the general rule. Ask your own question and see which parts of current Kansas law apply to your situation, with citations you can check.
Opens in Ezel Pro.
- Starts from the statutes this survey is built on
- Cites every source it relies on, so you can verify it
- Chat, drafting and research in one workspace