Court Incorrectly Treats Assets of Dissolved LLC as the Assets of the LLC's Members

Court Incorrectly Treats Assets of Dissolved LLC as the Assets of the LLC's Members

      The procedure followed in Ceres Protein, LLC v Thompson Mechanical & Design, Civ. Act. No. 3:14-CV-00491-TBR-LLK, 2016 WL 6090966 (W.D. Ky. Oct. 18, 2016) upon the administration of dissolution of an LLC was simply incorrect.

      Therein, Ceres Protein, LLC, a plaintiff in the action along with Shannon, one of its members, was administratively dissolved. Thereafter the defendants moved to substitute Tarullo, the other of Ceres Protein, LLC's members, for the LLC. When, ultimately, the LLC was reinstated, it was substituted back in for Tarullo, in effect returning the parties to the place they were at the initiation of the lawsuit.

      The issue is that the LLC need never have been removed as a party to the suit. The dissolution of an LLC does not limit its capacity to participate in litigation. See KRS § 275.300(4)(a). Furthermore, dissolution does not vest in the members the property, including the legal rights, of the LLC. See KRS § 275.300(3)(a). But that is what the substitution of Tarullo purported to do.

      The error of treating the members of Ceres Protein LLC as the owners, upon dissolution, of the LLC’s assets was ultimately corrected, but it should not have needed to be remedied in the first place.