prohibited distributions - Effect of distribution – Indebtedness. RESTRICTIONS ON DISTRIBUTIONS; DETERMINATION OF PROHIBITED DISTRIBUTIONS; EFFECT OF DISTRIBUTION; INDEBTEDNESS A. A distribution may not be made if, after giving effect to the distribution: 1. The limited liability company would not be able to pay its debts as they become due in the usual course of business; or 2. The limited liability company's total assets would be less than the sum of its total liabilities plus, unless the operating agreement permits otherwise, the amount that would be needed, if the limited liability company were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of members whose preferential rights are superior to the rights of members receiving the dist
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prohibited distributions - Effect of distribution – Indebtedness. RESTRICTIONS ON DISTRIBUTIONS; DETERMINATION OF PROHIBITED DISTRIBUTIONS; EFFECT OF DISTRIBUTION; INDEBTEDNESS A. A distribution may not be made if, after giving effect to the distribution: 1. The limited liability company would not be able to pay its debts as they become due in the usual course of business; or 2. The limited liability company's total assets would be less than the sum of its total liabilities plus, unless the operating agreement permits otherwise, the amount that would be needed, if the limited liability company were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of members whose preferential rights are superior to the rights of members receiving the distribution. B. The limited liability company may base a determination that a distribution is not prohibited under subsection A of this section on: 1. Financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances; or 2. A fair valuation or other method that is reasonable in the circumstances. C. Except as provided in subsection E of this section, the effect of a distribution under subsection A of this section is measured as of: 1. In the case of a distribution by purchase, redemption or other acquisition of a capital interest in the limited liability company, the date money or other property is transferred or debt incurred by the limited liability company; and 2. In all other cases, the date: a. the distribution is authorized, if the payment occurs within one hundred twenty (120) days after the date of authorization, or b. the payment is made if it occurs more than one hundred twenty (120) days after the date of authorization. D. A limited liability company's indebtedness to a member, incurred by reason of a distribution made in accordance with this section, is at parity with the limited liability company's indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement. E. 1. If the terms of the indebtedness provide that payment of principal and interest is to be made only if, and to the extent that, payment of a distribution to members could then be made under this section, indebtedness of a limited liability company, including indebtedness issued as a distribution, is not a liability for purposes of determinations made under subsection B of this section. 2. If the indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.