Can I File a Lawsuit Against a Dissolved LLC?

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Can I File a Lawsuit Against a Dissolved LLC?

A limited liability company (LLC) is an independent legal entity, separate from its owners that are known as members. In Arizona, the ability to sue an LLC is only hindered after the LLC has been property dissolved.

Officially ending an Arizona LLC’s existence requires a series of steps that begins with dissolution. An LLC may be involuntarily dissolved for administrative reasons — i.e., failing to pay state fees or make notification of a change in business address — or via a court ruling. To voluntarily dissolve an LLC, members must follow the dissolution steps spelled out in the LLC’s articles of organization or operating agreement. Typically, the rules to dissolve the LLC will require a majority vote of members on a resolution to dissolve.

After dissolution, the LLC will exist only for the purpose of what is known as “winding up” the company. During the winding up period, tasks may include locating and liquidating assets, paying debts, and distributing remaining assets to LLC members. Once the LLC has liquidated and distributed all of its known property and assets, a management or member of the LLC must sign and file articles of termination with the Arizona Corporation Commission.

Under ARS Section 29-3705, in order to bar future claims, the LLC must file a notice of winding up with the Commission and publish that notice at least once in a newspaper of general circulation located in its home county. The notice must specify the information required to be included in a claim and state that a claim against the LLC is barred unless the claim is filed no later than three years after publication of the notice or the filing date of the notice with the Commission, whichever is later.

A claim against a dissolved LLC can only be enforced to the extent of the LLC’s undistributed assets. If assets have been distributed to members after dissolution, a claim against a member of a dissolved LLC cannot exceed the amount of the member’s distribution.

Williams Commercial Law Group, L.L.P., is a law firm with decades of experience in commercial litigation, including IP infringement, employee lawsuits, business divorce, aviation, and high stakes litigation. Contact us at (602) 256-9400 and schedule a time to meet with us today.

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