Florida Statutes 605.0405 – Limitations on distributions
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(1) A limited liability company may not make a distribution, including a distribution under s. 605.0710, if after the distribution:
(a) The company would not be able to pay its debts as they become due in the ordinary course of the company’s activities and affairs; or
Terms Used In Florida Statutes 605.0405
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Distribution: means a transfer of money or other property from a limited liability company to a person on account of a transferable interest or in the person's capacity as a member. See Florida Statutes 605.0102
- Interest: means :(a) A share in a business corporation;(b) A membership in a nonprofit corporation;(c) A partnership interest in a general partnership;(d) A partnership interest in a limited partnership;(e) A membership interest in a limited liability company;(f) A share or beneficial interest in a real estate investment trust;(g) A member's interest in a limited cooperative association;(h) A beneficial interest in a statutory trust, business trust, or common law business trust; or(i) A governance interest or distributional interest in another entity. See Florida Statutes 605.0102
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Member: means a person who:
(a) Is a member of a limited liability company under…. See Florida Statutes 605.0102- Person: means an individual, business corporation, nonprofit corporation, partnership, limited partnership, limited liability company, limited cooperative association, unincorporated nonprofit association, statutory trust, business trust, common law business trust, estate, trust, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or another legal or commercial entity. See Florida Statutes 605.0102
- Property: means all property, whether real, personal, mixed, tangible, or intangible, or a right or interest therein. See Florida Statutes 605.0102
- Transferee: means a person to which all or part of a transferable interest is transferred, whether or not the transferor is a member. See Florida Statutes 605.0102
(b) The company’s total assets would be less than the sum of its total liabilities, plus the amount that would be needed if the company were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of members and transferees whose preferential rights are superior to those of persons receiving the distribution.(2) A limited liability company may base a determination that a distribution is not prohibited under subsection (1) on:(a) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances; or(b) A fair valuation or other method that is reasonable under the circumstances.(3) Except as otherwise provided in subsection (5), the effect of a distribution under subsection (1) is measured:(a) In the case of a distribution by purchase, redemption, or other acquisition of a transferable interest in the company, as of the earlier of the date on which:1. Money or other property is transferred or the debt is incurred by the company; and2. The person entitled to distribution ceases to own the interest or right being acquired by the company in return for the distribution.(b) In the case of a distribution of indebtedness, as of the date on which the indebtedness is distributed.(c) In all other cases, as of the date on which:1. The distribution is authorized if the payment occurs within 120 days after that date; or2. The payment is made if the payment occurs more than 120 days after the distribution is authorized.(4) A limited liability company’s indebtedness to a member or transferee incurred by reason of a distribution made in accordance with this section is at parity with the company’s indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.(5) A limited liability company’s indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of subsection (1) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that a distribution could then be made under this section. If the indebtedness is issued as a distribution, and by its terms provides that the payments of principal and interest are made only to the extent a distribution could be made under this section, then each payment of principal or interest of that indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.