Dissolution of a LLC

In a relatively recent published decision filed March 13, 2014, in a case entitled how Houk v. Nichols & Shanan Development LLC, the Washington State Court of Appeals decided that the provisions of RCW 25.15.303 as amended in 2010 are prospective only and do not apply retroactively.

The question before the court was whether the administrative dissolution of a LLC (limited liability company) activated the running of the three-year statute of limitations as to any claim against the limited liability company, its members or managers under the former provisions of RCW 25.15.303, adopted in 2006 and rewritten in 2010.

The court held the new provisions of RCW 25.15.303 as adopted in 2010, are not retroactive and are prospective only. Thus the administrative dissolution of the limited liability company under the former statute did in fact commence the three-year statute of limitations to run.

However, RCW 25.15.303 as now adopted in 2010 requires that in order for the three-year statute of limitations to commence to run as against a limited liability company, the limited liability company must formally file with the office of the Secretary of State a Certificate of Dissolution. The case stands for the proposition that the administrative dissolution of a limited liability company, in and of itself, will no longer activate the running of the three year statute of limitations provided for in the current version of RCW 25.15.303, as it would under the former provisions of RCW 25.15.303.

The amended statute reads as follows: “The dissolution of a limited liability company does not take away or impair any remedy available to or against that limited liability company, its managers, or its members for any right or claim existing, or any liability incurred at any time, whether prior to or after dissolution, unless the limited liability company has filed a certificate of dissolution.”

In the case before the court no certificate of dissolution had been filed by the limited liability company but rather the limited liability company had merely been administratively dissolved by the Secretary of State for failure to file its annual report, and pay its annual license fee with the Secretary of State’s office. The Plaintiff in the subject case contended that the administrative dissolution of the limited liability company was ineffective to commence the running of the statute of limitations. The court however disagreed, saying that under the former statute the limited liability company, having been administratively dissolved, the limited liability company need not take any affirmative action, under the former statute, in order for the three year statute of limitations to commence to run.

Since the Plaintiff’s lawsuit in Houk was filed more than three years after the administrative dissolution of the limited liability company, the court held that the Plaintiff’s case must be dismissed. The Defendants LLC, having been administratively dissolved on Oct 2nd, 2006, the Plaintiffs had until Oct 2nd 2009 in which to file suit. In fact suit was not filed until December 16th 2010, more than three years after the administrative dissolution of Oct 2nd, 2006. The court therefore dismissed the Plaintiffs cause of action against the Defendant.

The message is clear that under the new statute, in order for a limited liability company to cause the commencement of the running of the three-year statute of limitations as now expressly provided for in RCW 25.15.303, the limited liability company must make an affirmative filing of a Certificate of Dissolution with the office of the Washington Secretary of State. A limited liability company can no longer rely on an administrative dissolution, by the Washington Secretary of State, to cause the commencement of the running of the three year statute of limitations set forth in RCW 25.25.303 as now adopted by the legislator in 2010. If you have questions about this, please contact Dan Unti at unti@carneylaw.com.

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