LLC Distribution Limits and Improper-Distribution Liability in Nevada
At a glance
| Governing law, entity, distribution, and winding-up scope | Nevada ch. 86; for §§ 86.279-.351, distribution is direct/indirect money/property transfer other than the LLC's own interests, or incurred debt, to or for holders of classes/series with respect to interests or as the articles/agreement otherwise provide; § 86.343 states no liquidation exclusion, while § 86.521 separately orders post-dissolution assets (NRS 86.279, 86.343, 86.521) |
|---|---|
| Ordinary-course debt-payment and insolvency test | No distribution if afterward the LLC could not pay debts as they become due in the usual course of business (NRS 86.343(1)(a)) |
| Assets, liabilities, preferences, fair value, and exclusions | No distribution if afterward total assets would be below total liabilities, unless the articles specifically permit otherwise; no superior-preference add-on or express liability exclusion appears in the ordinary-LLC test (NRS 86.343(1)(b)) |
| Accounting statements, valuation methods, and decision date | Manager(s), or members if member-managed, may use reasonable accounting statements, fair valuation including unrealized appreciation/depreciation, or another reasonable method (NRS 86.343(3)) |
| Authorization, payment, redemption, debt, and delayed-payment measurement | Interest acquisition: earlier of property transfer/debt incurrence or holder ceasing to be a member for the acquired interest; other debt: distribution date; all others: authorization if paid within 120 days, otherwise payment; optional record date cannot precede fixing date (NRS 86.343(4), (8)) |
| Conditional distribution debt, creditor status, parity, and subordination | Debt payable only when a distribution could then be lawful is excluded from liabilities; each principal/interest payment on distribution debt is retested when paid. Entitled member/transferee has default creditor remedies, but no distribution-debt parity or subordination rule is stated (NRS 86.343(5), 86.346(2)) |
| Authorizer, standard, and liability to the company | No separate manager/member authorizer liability or conduct standard in NRS 86.343; subsection (3) identifies who may make the financial determination, while subsection (6) places the statutory recovery duty on the recipient member |
| Recipient knowledge, return amount, defenses, and contribution | Recipient member owes the LLC the full prohibited distribution; no knowledge, good-faith, reliance, excess-only, contribution, or impleader condition stated. Agreement/other-law liability remains possible (NRS 86.343(6)) |
| Limitation or repose period, accrual, and survival | Recipient not liable to LLC/series—or on dissolution/insolvency to creditors—after 3 years from distribution unless recovery action commenced before expiration (NRS 86.343(7)) |
| Tax, fiduciary, transfer, bankruptcy, creditor, and calculation boundaries | Post-dissolution order: creditors including member-creditors, then member profit/income claims, then capital; § 86.343 states no tax, fiduciary, fraudulent-transfer, bankruptcy, or calculation rule, and this table does not decide valuation, solvency, recipient status, standing, or other-law remedies (NRS 86.521) |
Requirements one by one
Nevada uses a cash-flow test and a simpler balance-sheet test
Under NRS § 86.343(1), the LLC must remain able to pay debts as they become due in the usual course. Total assets also must remain at least equal to total liabilities, unless the articles specifically permit otherwise. The Nevada test does not add superior liquidation preferences to liabilities.
For §§ 86.279-.351, NRS § 86.279 defines a distribution as a direct or indirect money or property transfer other than the company's own member interests, or incurred debt, to or for interest holders with respect to their interests or as the articles or agreement otherwise provide.
NRS §§ 86.341 and 86.343 work together: the first sends distribution terms and the contribution-value allocation default to the articles and operating agreement, while the second supplies the financial floor.
Fair value can include unrealized appreciation and depreciation
The manager or managers—or the members in a member-managed LLC—may rely on reasonable accounting statements, fair valuation expressly including unrealized appreciation and depreciation, or another reasonable method under NRS § 86.343(3). This page does not select a method or apply it to company figures.
For an interest purchase, redemption, or acquisition, subsection (4) uses the earlier of the property-transfer or debt-incurrence date and the date the member ceases to hold the acquired interest. Other distributed debt is measured when distributed. Other payments use authorization if paid within 120 days and payment if later.
Conditional distribution debt is retested, but parity is unstated
Under NRS § 86.343(5), debt payable only when a distribution could then be made is excluded from liabilities. If the debt was itself issued as a distribution, each principal or interest payment is retested when paid.
The section states no parity or subordination rule for distribution debt. NRS § 86.346(2) separately gives an entitled member or transferee default creditor status and remedies, subject to the operating agreement and the stated statutory exceptions; creditor status alone does not establish priority.
Recipient liability is strict and reaches the full distribution
NRS § 86.343(6) makes a member who receives a prohibited distribution liable to the LLC for the amount of the distribution. It states no knowledge, good-faith reliance, or excess-only condition, while preserving agreement and other-law obligations. The distribution section supplies no separate claim against a manager or member merely for authorizing the payment and no statutory contribution or impleader route.
Subsection (7) removes the recipient's distribution liability after three years from payment unless an action to recover it begins before that period expires. Its text also addresses creditor recovery when the LLC is dissolved or insolvent.
Dissolution has its own payment order
NRS § 86.521 pays creditors first after dissolution, including members who are creditors but excluding member contribution claims from that tier. Member profit and income claims follow, then capital contributions. Section 86.343 states no liquidation exclusion, but this page does not collapse the separate post-dissolution order into the ordinary distribution test.
What trips people up
- The articles exception reaches only the asset test. It does not erase the debts-as-due test.
- Liability is not limited to the unlawful excess. Subsection (6) states the amount as the distribution, not the portion beyond what could have been paid.
- A record date cannot be retroactive. NRS § 86.343(8) permits an articles- or agreement-controlled rule but otherwise bars a date before it is fixed.
Common questions
Does Nevada add superior liquidation preferences to liabilities?
No such add-on appears in NRS § 86.343(1)(b). The paragraph compares total assets with total liabilities and allows the articles-specific variation it states.
Must Nevada prove that a recipient knew of the violation?
NRS § 86.343(6) states no knowledge element for its recipient-member claim. Whether another claim or defense applies is outside this survey.
Is a manager automatically liable for approving an improper distribution?
NRS § 86.343 does not create a separate authorizer-liability route. It identifies who may make the financial determination and places its express recovery duty on the member who receives the prohibited distribution.
Statutes and sources
- NRS §§ 86.279, 86.341, and 86.343 — distribution definition and allocation, financial tests, valuation, timing, conditional debt, recipient liability, three-year cutoff, and record date. Official current Chapter 86 text (accessed September 19, 2026).
- NRS § 86.346 — distribution form and default creditor status. Official current text (accessed September 19, 2026).
- NRS § 86.521 — post-dissolution payment order. Official current text (accessed September 19, 2026).
Source links
Every statute quoted above, linked, with the date we checked it.
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