Individual members of a bankrupt LLC catch a break from a district court. The bankruptcy trustee can’t recoup payments the owners got from the firm,
even though the payments were made within two years prior to the bankruptcy filing.
The payments constituted distributions to the members so they could pay their tax bills.The court found that the LLC was required to make the payouts under an agreement
in which it would cover the members’ tax bills on their share of LLC income, if they consented to the firm’s conversion from a regular corporation (C corp) to an LLC
taxed as a partnership. The trustee sued to recover the funds from the members, but the court denied the claim
F-Squared Investment Management, LLC, D.C., Del.