This blog, written by Thomas E. Rutledge, focuses primarily on business entity law in Kentucky. Postings on contract law, contractual and statutory construction, and the entity law of other jurisdictions appear as well. There may as well be some random discussions of classical, medieval and renaissance history.
Friday, October 3, 2014
LLC’s Dissolution Did Not Transfer LLC’s Assets to the Member
LLC’s Dissolution Did Not Transfer LLC’s
Assets to the Member
decision from a Connecticut court has (again) confirmed the rule that an LLC’s
dissolution does not of itself transfer the LLC’s property to the LLC’s
members. Mukon v. Gollnick, 151 Conn.
App. 126, 92 A.3d 1052 (Conn. App. 2014).
the managing member of Sea Pearly Marine, LLC.In February, 2007, the LLC purchased a ship hull in Maine and paid sales
tax to the State of Connecticut.It
began refurbishing the hull into a ship; sales tax was not paid on the
additional items purchased pursuant to a resale certificate.
In 2009 Mukon
asked Gollnick, a CPA, about how to avoid Connecticut’s $250 per year LLC
filing fee.Gollnich told Mukon that the
fee could be avoided if the LLC were dissolved, and dissolution paperwork was
then filed with the state.
Mukon registered the vessel in his own name.Upon an audit he was required to pay $11,665.41 to the state.Mukon then brought an accounting malpractice
action against Gollnick.While Mukon
would prevail at trial, on appealGollnick was vindicated.
of Appeals wrote:
The thrust of
the plaintiff’s argument before the trial court was that the dissolution of the
company triggered an automatic transfer of the vessel from the company to the
plaintiff, and that this automatic transfer triggered the tax liability.
conclusions were ultimately embodied in the trial court’s decision.
of Appeals examined the Connecticut LLC Act as to the effect of dissolution,
and found that in fact it did not provide that an LLC’s dissolution effects a
transfer of its property.On that basis
the conclusion relied upon by the trial court was negated.
of Appeals also considered the statutes governing the application of an LLC’s
assets upon dissolution and the requirement that its outstanding liabilities be
satisfied.Ultimately the Court found
that Mukon’s obligations arose consequent to his failure to satisfy those
question should never arise in Kentucky as the LLC Act provides that
dissolution will “not…transfer title to the [LLC’s] property.”KRS § 275.300(3)(a).