Surviving Liability of Dissolved LLCs: Part 3

A member-dissolved LLC is different, as the court in Emily Laneobserved. There, the the members dissolved the LLC, wound it up, and ten days after dissolution the members cancelled the LLC. It was not until eight months after the dissolution that the HOA filed suit. The court of appeals held that the rule in Chadwick and Maplecourtcontrolled, and the LLC could be sued for three years but it could not assert claims against subcontractors.

The lack of standing to sue in Emily Lane arises out of similar statues as the liability in the Chadwick and Maplecourt decisions with only minor variations. Where an LLC is dissolved by its members, the members then proceed to wind-up the LLC. The winding-up period continues until the members file a cancellation of the certificate of formation. RCW 25.15.080. During this winding up period, the LLC has standing to prosecute and defend suits. RCW 25.15.295. Upon filing of the cancellation of the certificate of formation, the LLC ceases to exist as a separate legal entity and does not have standing to bring claims. So, RCW 25.15.303 may leave a member-dissolved LLC exposed to claims for up to three years after dissolution, regardless of when the LLC is cancelled.

The winding-up and cancellation statutes do not provide a limit on the period of time that an LLC may wind-up its affairs. Therefore, an LLC may be able to protect against the situation that arose in Chadwick Farms, Maplecourt Seattle, and Emily Lane by dissolving the LLC and extending its wind-up period for three years.

The next installment of this article will address the effect of the above holdings on the surviving liability of LLC members after dissolution of the LLC.