Know the Law: Does Dissolution of LLC Terminate Liability?

Jeremy Walker Headshot
Jeremy T. Walker
Director, Litigation Department
Published: Union Leader
December 20, 2020
News - Featured Image - Trial-Practice-and-Litigation

Q:  Many years ago I formed a New Hampshire Limited Liability Company for the purpose of operating my home renovation business.  I dissolved the LLC last year, but now I am being threatened with a lawsuit arising out of one of the home renovations.  Am I correct that I have no liability exposure because I conducted my business only as an LLC that is now dissolved?

A:  Not exactly.  It is a common misconception that the dissolution of a Limited Liability Company (LLC) automatically terminates any potential liability to its owners, or members as they are called.  Under New Hampshire law, third parties may still pursue an LLC and its members after dissolution for debts or other legal damages.

Many individuals take advantage of the LLC mode of doing business, as LLCs offer considerable protection of the personal assets of its owners.  Generally speaking, members are not individually obligated for debts or liabilities of the LLC merely by way of being a member.  But when an LLC dissolves and distributes its remaining assets and funds to its members, it is still possible for third parties to sue and recover from individual members up to the extent of those distributions.

Members can take certain steps, however, to limit the timeframe for which claims may be brought.  In particular, if at the time of dissolution, an LLC is aware of certain claims that may be made against the LLC, the LLC can notify the potential claimants within 60 days that any claimants must assert their claims within a given deadline, which deadline must be at least 120 days from dissolution.  If the claimant fails to timely assert the claim and follow certain steps after making the claim, that claim against the LLC will be forever barred.

An LLC can also limit the timeframe for unknown claims that may be asserted against the LLC by publishing a notice of dissolution in a newspaper of general circulation in the county of the LLC’s principal office.  The notice must include a description of the general information that must be received in any claim against the LLC and where the claim should be sent.  If that notice step is taken, any claim filed after three years from the date of the notice will be barred, and the LLC members will be protected from having to disburse any of their LLC distributions many years down the road.  You should talk with your business lawyer about these steps to limit exposure after dissolution.

Know the Law is a bi-weekly column sponsored by McLane Middleton, Professional Association.  Questions and ideas for future columns should be emailed to [email protected].  Know the Law provides general legal information, not legal advice.  We recommend that you consult a lawyer for guidance specific to your particular situation.