Skip to main content
Find a Lawyer

Indiana Code Title 23. Business and Other Associations § 23-18-5-6

Current as of January 02, 2024 | Updated by Findlaw Staff

Sec. 6. (a) A distribution may not be made if after giving effect to the distribution:

(1) the limited liability company would not be able to pay its debts as the debts become due in the usual course of business;  or

(2) the limited liability company's total assets would be less than the sum of its total liabilities plus, unless the operating agreement permits otherwise, the amount that would be needed if the affairs of the limited liability company were to be wound up at the time of the distribution to satisfy any preferential rights that are superior to the rights of members receiving the distribution.

(b) The limited liability company may base a determination that a distribution is not prohibited under subsection (a) upon one (1) of the following:

(1) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances.

(2) A fair valuation of assets and liabilities or other reasonable method approved by the members or managers, if any.

(c) Except as provided in subsection (e), the effect of a distribution under subsection (a) is measured as of:

(1) the date the distribution is authorized if the payment occurs not more than one hundred twenty (120) days after the date of authorization;  or

(2) the date the payment is made if it occurs more than one hundred twenty (120) days after the date of authorization.

(d) A limited liability company's indebtedness to a member incurred by reason of an obligation to make a distribution in accordance with this section is at parity with the limited liability company's indebtedness to its general unsecured creditors, except to the extent subordinated by agreement.

(e) If terms of the indebtedness provide that payment of principal and interest is to be made only if and to the extent that payment of a distribution to members could then be made under this section, indebtedness of a limited liability company, including indebtedness issued as a distribution, is not a liability for purposes of determinations made under subsection (b).

(f) If the indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.

Previous Part of Code Next Part of Code
Back to Chapter List

Cite this article: FindLaw.com - Indiana Code Title 23. Business and Other Associations § 23-18-5-6 - last updated January 02, 2024 | https://codes.findlaw.com/in/title-23-business-and-other-associations/in-code-sect-23-18-5-6/

FindLaw Codes may not reflect the most recent version of the law in your jurisdiction. Please verify the status of the code you are researching with the state legislature before relying on it for your legal needs.

Was this helpful?

Welcome to FindLaw's Cases & Codes

A free source of state and federal court opinions, state laws, and the United States Code. For more information about the legal concepts addressed by these cases and statutes, visit FindLaw’s Learn About the Law.

Go to Learn About the Law

Latest Blog Posts

For Legal Professionals

Learn About The Law

Get help with your legal needs

FindLaw’s Learn About the Law features thousands of informational articles to help you understand your options. And if you’re ready to hire an attorney, find one in your area who can help.

Go to Learn About the Law

Need to Find an Attorney?

Search our directory by legal issue

Enter information in one or both fields (Required)

Copied to clipboard