{"data":{"id":"us-ky/krs-275.225","jurisdiction":"us-ky","citation":"KRS 275.225","heading":"Circumstances preventing distribution -- Determination -- Definition.","body":"(1) No distribution shall be made if, after giving effect to the distribution:\n(a) The limited liability company would not be able to pay its debts as they\nbecome due in the usual course of business;\n(b) The limited liability company's assets would be less tha n the sum of its\nliabilities plus, unless otherwise provided in an operating agreement, the\namount that would be needed, if the limited liability company were to be\ndissolved at the time of the distribution, to satisfy the preferential rights of\nother memb ers upon dissolution which are superior to the rights of the\nmember receiving the distribution; or\n(c) The distribution violates the operating agreement.\n(2) The determination that a distribution is not prohibited under subsection (1) of this\nsection may be based upon:\n(a) Financial statements prepared on the basis of accounting practices and\nprinciples that are reasonable under the circumstances; or\n(b) A fair valuation or other method that is reasonable under the circumstances.\n(3) Except as provided in s ubsection (5) of this section, the effect of a distribution\nunder subsection (1) of this section shall be measured as of:\n(a) The date the distribution is authorized if the payment occurs within one\nhundred twenty (120) days after the date of authorization; or\n(b) The date payment is made if it occurs more than one hundred twenty (120)\ndays after the date of authorization.\n(4) A limited liability company's indebtedness to a member incurred by reason of a\ndistribution made in accordance with this section sha ll be at parity with the limited\nliability company's indebtedness to its general unsecured creditors, except to the\nextent subordinated by agreement.\n(5) If terms of the indebtedness provide that payment of principal and interest is to be\nmade only if, and  to the extent that, payment of a distribution to members could\nthen be made under this section, then indebtedness of a limited liability company,\nincluding indebtedness issued as a distribution, shall not be a liability for purposes\nof determinations made under subsection (1) of this section.\n(6) If the indebtedness is issued as a distribution, then each payment of principal or\ninterest on the indebtedness shall be treated as a distribution, the effect of which\nshall be measured on the date the payment is actually made.\n(7) For purposes of this section, the term \"distribution\" shall not include amounts\nconstituting reasonable compensation for present or past services or reasonable\npayments made in the ordinary course of business pursuant to a bona fide retirement\nplan or other benefit program.","path":["KRS Chapter 275"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=13874","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:53:27Z","sha256":"6d2e907afd0f5175d194f0c70f54c08c1a455a3d94cae73f283fb1a14286fea7","source_id":"us-ky","stale":false,"prev":"us-ky/krs-275.220","next":"us-ky/krs-275.230"},"notice":"GroundRules: Original legal text. Not legal advice."}