LLC’s Dissolution Did Not Transfer LLC’s Assets to the Member

LLC’s Dissolution Did Not Transfer LLC’s Assets to the Member

 

A June 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).

 

Mukon was 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.

 

Eventually 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 appeal  Gollnick was vindicated.

 

 

The Court 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.

 

Those conclusions were ultimately embodied in the trial court’s decision.

 

The Court 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.

 

The Court 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 statutory requirements.

 

This 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).