LLC Distribution Limits and Improper-Distribution Liability in Nebraska

At a glance

Requirements one by one

Nebraska applies both financial tests and a preference add-on

Neb. Rev. Stat. § 21-134(a) bars a distribution if, afterward, the company could not pay debts as they become due in the ordinary course or total assets would fall below liabilities plus the amount needed to satisfy superior member preferences on a hypothetical dissolution, winding up, and termination.

Under subsection (g), distribution excludes reasonable present- or past-service compensation and reasonable ordinary-course payments under a bona fide retirement plan or other benefits program.

The valuation and timing rules depend on the transaction

The LLC may use financial statements prepared under reasonable accounting practices and principles, fair valuation, or another reasonable method under § 21-134(b). This page does not select a method or apply it to company facts.

For a purchase, redemption, or other acquisition of a transferable interest, subsection (c) measures when money or property is transferred or company debt is incurred. Other payments use authorization if paid within 120 days and payment if later.

Conditional debt is excluded, retested, and ordinarily at parity

Section 21-134(e) excludes debt whose terms allow principal and interest only to the extent a distribution could then be made. Each principal or interest payment on debt issued as a distribution is itself retested when paid.

Compliant member distribution debt is at parity with general unsecured company debt under § 21-134(d). Section 21-133(d) separately gives an entitled member or transferee creditor status and remedies. These rules do not create secured status.

Authorizer and recipient exposure both cover the unlawful excess

Under Neb. Rev. Stat. § 21-135(a), a consenting member of a member-managed LLC or manager of a manager-managed LLC is personally liable to the company for the excess if the distribution violates § 21-134 and the person failed to comply with § 21-138 while consenting. The operating agreement may expressly shift consent authority and responsibility among members, but § 21-110(f)(3) bars it from eliminating money-damages liability for a § 21-135 duty breach.

Subsection (c) separately makes a recipient who knows of the violation liable to the LLC for the unlawful excess received. A sued authorizer may implead other liable authorizers and knowing recipients for contribution under subsection (d).

Every action under the liability section has a two-year bar

Neb. Rev. Stat. § 21-135(e) says an action under that section is barred if not commenced within two years after the distribution. The sentence does not state an adjudication condition or extension tied to dissolution or termination.

Winding up still begins with company liabilities

Neb. Rev. Stat. § 21-148(a)-(b) continues the dissolved company only for winding up and requires it to discharge debts, obligations, or other liabilities, close its activities, and marshal and distribute assets. Sections 21-134 and 21-135 state no winding-up exclusion from their financial and recovery rules.

What trips people up

• Acquisitions do not use the 120-day branch. An interest purchase, redemption, or acquisition is measured when property moves or debt is incurred.
• Consent is not enough by itself. Authorizer liability also requires failure to comply with § 21-138 in consenting to the violation.
• The recipient claim is not strict liability. Section 21-135(c) requires knowledge and caps liability at the unlawful excess received.

Common questions

Does the operating agreement change who bears consent responsibility?

It can expressly relieve one or more members in a member-managed LLC and impose the responsibility on others under § 21-135(b). The agreement cannot eliminate money-damages liability for a § 21-135 duty breach.

Does lawful distribution debt rank below unsecured debt?

No statutory subordination appears in § 21-134(d). It places compliant member distribution debt at parity with general unsecured company debt.

Is a dissociated member automatically entitled to payment?

No. Neb. Rev. Stat. § 21-133(b) says dissociation does not itself create a distribution right; the company must decide to make an interim distribution.

Statutes and sources

• Neb. Rev. Stat. §§ 21-102(6), 21-133 — define distribution and state interim shares, entitlement, form, and creditor status. Official § 21-102 and § 21-133 (accessed September 19, 2026).
• Neb. Rev. Stat. § 21-134 — states the financial tests, valuation, timing, debt, parity, and exclusion rules. Official current text (accessed September 19, 2026).
• Neb. Rev. Stat. §§ 21-110(f), 21-135, and 21-138 — govern nonwaivability, authorizer and recipient liability, contribution, the two-year bar, and the incorporated duty standard. Official § 21-110, § 21-135, and § 21-138 (accessed September 19, 2026).
• Neb. Rev. Stat. § 21-148(a)-(b) — states the winding-up continuation and mandatory liabilities-and-assets work. Official current text (accessed September 19, 2026).