LLC Distribution Limits and Improper-Distribution Liability in Mississippi
At a glance
| Governing law, entity, distribution, and winding-up scope | Revised Mississippi LLC Act, ch. 29; Article 6 covers distributions to financial-interest members before withdrawal/dissolution, subject to certificate/agreement terms; reasonable service compensation and bona fide ordinary-course benefit payments excluded from § 79-29-609; winding up uses separate § 79-29-813, not § 79-29-609 (§§ 79-29-601, -609(1), -813(5)) |
|---|---|
| Ordinary-course debt-payment and insolvency test | Ordinary distribution barred if afterward LLC could not pay debts as they become due in usual course; winding-up distributions instead require payment/reasonable provision for claims under separate ordering rule (§§ 79-29-609(1)(a), -813(1)-(2), (5)) |
| Assets, liabilities, preferences, fair value, and exclusions | Ordinary distribution barred if afterward assets would be below liabilities plus amount needed for superior member dissolution preferences; reasonable compensation and bona fide ordinary-course benefit payments excluded (§ 79-29-609(1)(b)) |
| Accounting statements, valuation methods, and decision date | Ordinary test may use financial statements based on reasonable-under-the-circumstances accounting practices/principles, or fair valuation or another reasonable method (§ 79-29-609(2)) |
| Authorization, payment, redemption, debt, and delayed-payment measurement | All ordinary distributions measured at authorization if paid within 120 days, otherwise at payment; no separate redemption, acquisition, or indebtedness measurement rule stated (§ 79-29-609(3)) |
| Conditional distribution debt, creditor status, parity, and subordination | Entitled member has creditor status/remedies subject to §§ 79-29-609 and -813; surveyed provisions state no conditional-debt exclusion, payment-by-payment retest, or distribution-debt parity/subordination rule (§ 79-29-607) |
| Authorizer, standard, and liability to the company | Member/manager voting for or assenting to certificate-, agreement-, or § 79-29-609-violating distribution owes LLC excess over permissible amount if noncompliance with § 79-29-609 is established; Article 6 authorizer rule applies to any member (§§ 79-29-601, -611(1)) |
| Recipient knowledge, return amount, defenses, and contribution | Member who knew an ordinary distribution violated § 79-29-609 owes LLC full distribution; nonknowing member owes nothing under that rule. Liable authorizer gets contribution from other liable authorizers and specified knowing member-recipients (§ 79-29-611(1)-(2)) |
| Limitation or repose period, accrual, and survival | Unless otherwise agreed, assenting/receiving member has no amount liability under chapter/other law after 2 years from distribution unless recovery action begins before expiry and adjudicates liability; wording does not extend this cutoff to manager-only authorizers (§ 79-29-611(4)); separate parallel recipient cutoff for winding-up distributions (§ 79-29-813(4)) |
| Tax, fiduciary, transfer, bankruptcy, creditor, and calculation boundaries | Agreement/other-law member liability preserved subject to member cutoff; § 79-29-813 separately governs winding-up priority and knowing-recipient recovery; surveyed provisions state no tax, bankruptcy, fraudulent-transfer, fiduciary, or calculation rule (§§ 79-29-611(3)-(4), -813) |
Requirements one by one
Ordinary distributions use two tests; winding up uses a different scheme
For an ordinary distribution, § 79-29-609(1) requires the LLC to remain able to pay debts as they become due in the usual course and to keep assets at least equal to liabilities plus superior member dissolution preferences. Reasonable service compensation and reasonable ordinary-course payments under a bona fide retirement or benefits program are excluded from that section's distribution definition.
During winding up, § 79-29-813 replaces that test. It puts creditors first, then liabilities for interim and withdrawal distributions, then return of contributions and the remaining financial interests. Subsection (5) expressly says § 79-29-609 does not apply to a distribution governed by § 79-29-813.
Valuation choices are broad, but the timing rule is simple
Section 79-29-609(2) permits reasonable-under-the-circumstances accounting statements, fair valuation, or another reasonable method. It does not choose among them or decide whether a company's figures satisfy the tests.
Under subsection (3), authorization is the measurement date if payment occurs within 120 days; otherwise payment controls. Mississippi states no separate date for a redemption, interest acquisition, or distribution of indebtedness and supplies no conditional-distribution-debt exclusion or installment retest.
Authorizers and recipients face different measures
Under § 79-29-611(1), a member or manager who votes for or assents to a distribution violating the certificate, operating agreement, or § 79-29-609 may owe the LLC the excess beyond what could have been distributed lawfully, if the stated noncompliance is established. The liable authorizer may seek contribution from other member or manager authorizers who could be liable and from the knowing member-recipients identified by the paragraph.
A member-recipient instead faces the full amount under subsection (2), but only if the member knew at the time that the distribution violated § 79-29-609. A member without that knowledge is not liable under that subsection. Section 79-29-813(3) supplies a parallel full-amount knowledge rule for a winding-up distribution that violates the statutory payment order.
The two-year wording is member-specific and agreement-sensitive
Unless otherwise agreed, § 79-29-611(4) removes amount liability under the chapter or other applicable law for a member who assents to or receives a distribution after two years, unless an action begins before expiration and an adjudication of liability is made in it. That sentence does not name a manager who is not also an assenting member. Section 79-29-813(4) supplies a parallel rule for a member receiving a winding-up distribution.
What trips people up
- Winding up is not just another application of the ordinary solvency test. Section 79-29-813(5) expressly displaces § 79-29-609 for its distributions.
- Recipient exposure is not limited to the excess. A knowing member owes the amount of the distribution under §§ 79-29-611(2) and 79-29-813(3).
- The statute's contribution cross-reference is unusual. Section 79-29-611(1)(b) literally refers to knowing receipt in violation of § 79-29-605, the in-kind-distribution section, rather than § 79-29-609. This page preserves that enacted wording without correcting it.
Common questions
Does Mississippi provide a special rule for distribution debt?
Not in the surveyed provisions. Section 79-29-607 gives an entitled member creditor remedies, but §§ 79-29-609 and 79-29-611 state no conditional-debt exclusion, payment-by-payment retest, or parity rule.
Does a recipient owe anything without knowledge?
Not under the Article 6 or winding-up recipient rules. Sections 79-29-611(2)(b) and 79-29-813(3) expressly excuse the member-recipient who lacked the specified knowledge, while preserving identified agreement and other-law boundaries.
Does filing suit alone satisfy the special cutoff?
The text requires more. Sections 79-29-611(4) and 79-29-813(4) require a timely recovery action and an adjudication of liability in that action.
Statutes and sources
- Miss. Code §§ 79-29-601 and 79-29-607 — Article 6 member scope, interim distributions, and creditor status. Official Mississippi HB 683 sent to the Governor (accessed September 19, 2026).
- Miss. Code §§ 79-29-609 and 79-29-611 — ordinary financial tests, valuation, timing, authorizer and recipient liability, contribution, and the member cutoff. Official Mississippi HB 683 sent to the Governor (accessed September 19, 2026).
- Miss. Code § 79-29-813 — winding-up priority, knowing-recipient recovery, cutoff, and displacement of the ordinary test. Official Mississippi HB 683 sent to the Governor (accessed September 19, 2026).
Source links
Every statute quoted above, linked, with the date we checked it.
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