LLC Distribution Limits and Improper-Distribution Liability in Wyoming
At a glance
| Governing law, entity, distribution, and winding-up scope | Wyoming LLC Act, W.S. ch. 17-29; money/property on account of transferable interest (§ 17-29-102(a)(v)); ordinary interim and creditor-first winding-up surplus rules (§§ 17-29-404, -708) |
|---|---|
| Ordinary-course debt-payment and insolvency test | No distribution if, afterward, LLC could not pay debts as they come due in ordinary course (§ 17-29-405(a)(i)) |
| Assets, liabilities, preferences, fair value, and exclusions | Also barred if assets fall below liabilities plus superior winding-up preferences; reasonable service compensation and ordinary bona fide benefit-plan payments excluded; qualifying conditional debt not a test liability (§ 17-29-405(a)(ii), (e), (g)) |
| Accounting statements, valuation methods, and decision date | May use reasonable accounting statements, fair valuation, or another reasonable method; determination date varies with form and payment delay (§ 17-29-405(b)-(c), (f)) |
| Authorization, payment, redemption, debt, and delayed-payment measurement | Purchase/redemption/interest acquisition: property transfer or debt incurrence; other distributions: authorization if paid within 120 days, payment if later; distribution-debt payments retested (§ 17-29-405(c), (f)) |
| Conditional distribution debt, creditor status, parity, and subordination | Member debt from compliant distribution has unsecured-creditor parity unless expressly agreed otherwise in writing; conditional debt excluded from test liabilities, each debt payment retested; entitled member/transferee has creditor remedies (§§ 17-29-404(d), -405(d)-(f)) |
| Authorizer, standard, and liability to the company | Consenting member in member-managed LLC or manager in manager-managed LLC owes company improper excess only if consent failed § 17-29-409 conduct standard; member-managed agreement can shift consent responsibility (§ 17-29-406(a)-(b)) |
| Recipient knowledge, return amount, defenses, and contribution | Any knowing recipient owes LLC only excess received; sued authorizer may implead other liable authorizers and knowing recipients for contribution (§ 17-29-406(c)-(d)) |
| Limitation or repose period, accrual, and survival | Action under § 17-29-406 barred if not commenced within two years after distribution (§ 17-29-406(e)) |
| Tax, fiduciary, transfer, bankruptcy, creditor, and calculation boundaries | Agreement governs pre-dissolution allocations subject to the Act; § 17-29-708 puts creditors first during winding up. This table decides no solvency, valuation, knowledge, creditor-claim, tax, fiduciary, transfer, or bankruptcy outcome (§§ 17-29-110, -404, -405, -708). |
Requirements one by one
Covered payments and winding up
Wyo. Stat. § 17-29-102(a)(v) calls a transfer of money or other property to another person on account of a transferable interest a distribution, subject to § 17-29-405(g)’s exclusion. Under § 17-29-404, a pre-dissolution interim payment requires a company decision. In § 17-29-708(a)-(c), winding-up assets go first to creditors, including members who are creditors, and then any surplus follows the prescribed order.
Debt-payment and asset tests
Section 17-29-405(a) prohibits a distribution if afterward the LLC could not pay debts as they come due in the ordinary course of its activities. It separately prohibits a payment that would leave total assets below total liabilities plus the amount needed to satisfy superior member preferences on a hypothetical immediate winding up. Section 17-29-405(g) excludes reasonable compensation for services and reasonable ordinary-course payments under a bona fide retirement or other benefit program from the subsection’s distribution tests.
Accounting basis and measurement date
Under § 17-29-405(b), the company may use financial statements prepared with reasonable accounting practices and principles, a fair valuation, or another reasonable method. For an interest purchase, redemption, or other acquisition, subsection (c) measures the effect when property transfers or debt is incurred. Other payments use authorization if made within one hundred twenty days; a later payment is measured when made.
Debt issued as a distribution
Section 17-29-405(d) places a compliant distribution debt to a member at parity with general unsecured debt, except as expressly agreed otherwise in writing. Subsection (e) excludes qualifying debt from test liabilities when principal and interest are payable only to the extent a member distribution could then be made. Under subsection (f), each principal or interest payment on debt issued as a distribution is itself tested on its payment date. An entitled member or transferee also has creditor status and remedies with respect to the distribution under § 17-29-404(d).
Authorizers, recipients, and contribution
Under § 17-29-406(a), a member of a member-managed LLC or manager of a manager-managed LLC who consents to a payment violating § 17-29-405 owes the company only the excess, and only if the person failed to comply with § 17-29-409 in consenting. The care and good-faith standards appear in § 17-29-409(c)-(d); § 17-29-409(g) applies the relevant standards to managers. A member-managed operating agreement may expressly shift distribution-consent authority and responsibility, with the statutory liability following that assignment under § 17-29-406(b).
Section 17-29-406(c) makes any person who received a distribution knowing it violated § 17-29-405 liable to the LLC for the improper excess received. A sued authorizer may implead other liable authorizers and knowing recipients for contribution under § 17-29-406(d).
Two-year bar
Section 17-29-406(e) bars an action under that section unless commenced within two years after the distribution. The text ties the period to the distribution date.
What trips people up
The written-agreement exception in § 17-29-405(d) changes the stated parity of compliant distribution debt; it does not itself establish that a proposed payment passes the financial tests. The 120-day authorization rule in subsection (c) applies to ordinary distributions, while interest acquisitions and debt installment payments use different dates. Winding-up surplus remains subject to the creditor-first order in § 17-29-708.
Common questions
Does a member automatically have a right to an interim payment?
No. Section 17-29-404(b) gives that right only if the LLC decides to make an interim distribution. The default allocation under subsection (a) is generally equal shares, subject to the operating agreement and listed transfer, charging-order, and tax-filing exceptions.
Can a member insist on receiving property instead of cash?
Section 17-29-404(c) does not give a person a right to demand or receive a distribution in a form other than money. It permits a limited in-kind route for fungible assets with value-proportionate shares, subject to the winding-up rule.
Can the operating agreement address interim distributions?
Under § 17-29-110(a)-(b), the operating agreement governs distributions to members before dissolution and Chapter 29 fills gaps. Section 17-29-405 separately states the financial prohibitions, and § 17-29-406(b) expressly permits reassignment of consent responsibility in a member-managed LLC.
Statutes and sources
The current official Wyoming Legislature Title 17 PDF, accessed September 22, 2026, supplies §§ 17-29-102, -110, -404 to -406, -409, and -708 cited above. The PDF reflects the state’s 2026 update.
Source links
Every statute quoted above, linked, with the date we checked it.
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