CHAPTER 5. FINANCE
IC 23-18-5
Chapter 5. Finance
IC 23-18-5-1
Promises to contribute property or services; enforceability
Sec. 1. (a) A promise by a member to make a contribution to the
limited liability company is not enforceable unless the promise is
written and signed by the member.
(b) Except as otherwise provided in a written operating
agreement, a member is obligated to the limited liability company to
perform any enforceable promise to contribute cash or property or to
perform services, even if the member is unable to perform for any
reason, including death and disability.
(c) If a member does not make the required contribution of
property or services, the member is obligated, at the option of the
limited liability company, to contribute cash equal to the value of
that portion of the contribution that has not been made. This option
is in addition to and not in lieu of any other rights, including the right
to specific performance, that the limited liability company may have
against the member under the operating agreement or applicable law.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-2
Obligation to make capital contribution or other payment;
compromise; effect; remedies or consequences of nonpayment
Sec. 2. (a) The obligation of a member to make a capital
contribution or return money or other property paid or distributed in
violation of this article may be compromised only:
(1) in compliance with a written operating agreement; or
(2) if a written operating agreement does not so provide, with
the unanimous consent of the members.
(b) Any compromise does not affect the rights, if any, of any
creditor of a limited liability company who, before the compromise,
extends credit or acts in reliance on the obligation after the member
signs a writing that reflects the obligation.
(c) An operating agreement may provide that a member who fails
to make a capital contribution or other payment that the member is
required to make is subject to specified remedies for or specified
consequences of the failure. The remedy or consequence may include
the following form:
(1) Reducing the defaulting member's interest in the limited
liability company.
(2) Subordinating the defaulting member's interest in the limited
liability company to that of nondefaulting members.
(3) A forced sale of the defaulting member's interest in the
limited liability company.
(4) Forfeiture of the defaulting member's interest in the limited
liability company.
(5) A loan by the nondefaulting members of the amount
necessary to meet the commitment.
(6) A determination of the value of the member's interest in the
limited liability company by appraisal or by formula and
redemption and sale of the defaulting member's interest in the
limited liability company at that value.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-3
Allocation of profits and losses
Sec. 3. Unless otherwise provided in the operating agreement,
profits and losses must be allocated on the basis of the agreed value,
as stated in the records of the limited liability company, of the
contributions made by each member to the extent the contributions
have been received by the limited liability company and not
previously returned.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-4
Shared distributions of cash or other assets
Sec. 4. Except as provided in section 5 or 5.1 of this chapter and
IC 23-18-9-6, distributions of cash or other assets of a limited
liability company must be shared among the members and among
classes of members in the manner provided in the operating
agreement. If the operating agreement does not provide otherwise,
distributions must be allocated on the basis of the agreed value, as
stated in the records of the limited liability company, of the
contributions made by each member to the extent the contributions
have been received by the limited liability company and not
previously returned. A member is entitled to receive distributions
described in this section from a limited liability company to the
extent and at the times or upon the happening of the events specified
in the operating agreement or at the times determined by the
members or managers, if any, voting under IC 23-18-4-3.
As added by P.L.8-1993, SEC.301. Amended by P.L.269-1999,
SEC.3.
IC 23-18-5-5
Dissociation; companies existing on or before June 30, 1999
Sec. 5. (a) Unless otherwise provided in a written operating
agreement, a limited liability company existing under this article on
or before June 30, 1999, is governed by this section.
(b) Upon the occurrence of an event of dissociation under
IC 23-18-6-5 that does not cause dissolution, a dissociating member
is entitled to receive:
(1) any distribution that the member is entitled to under this
article or the operating agreement; and
(2) unless otherwise provided in the operating agreement,
within a reasonable time after dissociation, the fair value of the
member's interest in the limited liability company as of the date
of dissociation based on the member's right to share in
distributions from the limited liability company, less a
distribution received under subdivision (1).
As added by P.L.8-1993, SEC.301. Amended by P.L.269-1999,
SEC.4; P.L.130-2006, SEC.29.
IC 23-18-5-5.1
Dissociation; companies formed after June 30, 1999
Sec. 5.1. (a) A limited liability company formed under this article
after June 30, 1999, is governed by this section.
(b) Upon the occurrence of an event of dissociation under
IC 23-18-6-5, a dissociating member is entitled to receive:
(1) any distribution that the member is entitled to under this
article or the operating agreement; and
(2) unless otherwise provided in the operating agreement,
within a reasonable time after dissociation, the fair value of the
member's interest in the limited liability company as of the date
of dissociation based on the member's right to share in
distributions from the limited liability company, less a
distribution received under subdivision (1).
As added by P.L.269-1999, SEC.5. Amended by P.L.130-2006,
SEC.30.
IC 23-18-5-6
Distributions
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.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-7
Unlawful distributions; liability
Sec. 7. (a) A member or manager who votes for or assents to a
distribution in violation of the operating agreement or section 6 of
this chapter is personally liable to the limited liability company for
the amount of the distribution that exceeds the amount that could
have been distributed without violating the operating agreement or
section 6 of this chapter or if it is established that the member or
manager did not act in compliance with section 6 of this chapter.
(b) Each member or manager held liable under subsection (a) for
an unlawful distribution is entitled to contribution from the
following:
(1) Each other member or manager who could be held liable
under subsection (a) for the unlawful distribution.
(2) Each member for the amount the member received knowing
that the distribution was made in violation of the operating
agreement or section 6 of this chapter.
(c) A proceeding under this section is barred unless it is
commenced not more than two (2) years after the date on which the
effect of the distribution is measured under section 6 of this chapter.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-8
Distributions in kind
Sec. 8. (a) Except as provided in the operating agreement, a
member, regardless of the nature of the member's contribution, does
not have a right to demand and receive a distribution from a limited
liability company in a form other than cash.
(b) Except as provided in the operating agreement, a member may
not be compelled to accept a distribution in kind from a limited
liability company to the extent that the member's percentage interest
in the assets being distributed in kind exceeds the percentage of
distributions that the member is entitled to receive under section 4 of
this chapter.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-9
Status of member entitled to receive distribution
Sec. 9. At the time a member becomes entitled to receive a
distribution, the member has the status of and is entitled to all
remedies available to a creditor of the limited liability company with
respect to the distribution.
As added by P.L.8-1993, SEC.301.