Can You Collect an LLC Judgment From the Heirs?

What happens to a judgment against an LLC when its registered agent dies?

Nothing happens to the judgment. A registered agent only receives legal papers for the company, so the agent’s death leaves the company’s debt where it was: with the company.

Under Minn. Stat. § 322C.0116, subd. 1, a registered agent “is an agent of the company for service of any process, notice, or demand required or permitted by law to be served on the company.” The debt belongs to the LLC: Minn. Stat. § 322C.0304, subd. 1 provides that an LLC’s debts “are solely the debts, obligations, or other liabilities of the company.” Minnesota does not even require an agent. Minn. Stat. § 322C.0113 says every LLC “shall have a registered office and may have a registered agent,” and Minn. Stat. § 5.36, subd. 2 allows the agent to be “a natural person residing in this state,” a corporation, or another LLC.

This question came to me from a viewer of my live Q&A show: a business had lost a lawsuit, sold its building and equipment, and then the person named as its registered agent died. My answer was that the agent’s death has no effect on the judgment, because the agent is only a person authorized to receive lawsuit papers for the company. The real question in that situation is where the sale money went. Where the owner named themself as the registered agent, the agent’s death is also the owner’s death, and the rest of this page addresses that case.

How do you serve an LLC whose registered agent has died?

Serve the Minnesota Secretary of State. When the agent “cannot with reasonable diligence be found at the agent’s street address, the secretary of state is an agent of the company,” and Minnesota’s general service statute lists an officer or manager only “if no agent has been appointed.”

Minn. Stat. § 5.25, subd. 1 sets the order: papers “may be served on: (1) the registered agent, if any; (2) if no agent has been appointed then on an officer, manager, or general partner of the entity; or (3) if no agent, officer, manager, or general partner can be found at the address on file with the secretary of state, the secretary of state as provided in this section.” The LLC act adds that if the agent “cannot with reasonable diligence be found at the agent’s street address, the secretary of state is an agent of the company upon whom process, notice, or demand may be served” under Minn. Stat. § 322C.0116, subd. 2. Keep a record of the attempt at the agent’s address, because that diligence is the condition.

Service on the Secretary of State “must be made by filing with the secretary of state one copy of the process, notice, or demand along with payment of a $35 fee” under subdivision 3 of § 5.25. The office then forwards a copy “by certified mail” to the LLC “in care of the agent of the business entity, at its registered office in this state” under subdivision 6. An LLC served this way has, under subdivision 7, “30 days from the date of mailing by the secretary of state in which to answer the complaint.” If the LLC has dissolved or had its authority revoked, subdivision 5 provides that “The court shall determine if service is proper.” For an LLC that “has voluntarily dissolved,” subdivision 5(b) provides that “service must be made according to subdivision 3 or 4, so long as claims are not barred under the provisions of the chapter that governed the business entity,” and for one that “has been involuntarily dissolved or its authority to transact business in this state has been revoked,” subdivision 5(c) provides that “service must be made according to subdivision 3 or 4.” Other methods remain available: § 322C.0116, subd. 4 “does not affect the right to serve process, notice, or demand in any other manner provided by law.”

What does an heir inherit when an LLC owner dies?

An heir inherits the owner’s economic interest in the LLC, not the LLC’s debts. The interest carries a right to distributions, and the debts stay with the company under Minnesota’s LLC act.

Death ends the owner’s status as a member. Minn. Stat. § 322C.0602 lists the events that dissociate a member, including, for an individual, that “the person dies.” After that, Minn. Stat. § 322C.0603, subd. 1 provides that the interest is held “solely as a transferee.” A transferee has “the right to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled” under Minn. Stat. § 322C.0502, subd. 2. The owner’s personal representative may exercise a transferee’s rights and, “for the purposes of settling the estate, the rights of a current member” under Minn. Stat. § 322C.0504.

None of that moves the debt. Under § 322C.0304, subd. 1, the company’s debts “do not become the debts, obligations, or other liabilities of a member, manager, or governor solely by reason of the member acting as a member.” The practical consequence for you: distributions on the interest now go to the estate or the heirs, so payments out of the LLC are what to watch. My page on what happens when an LLC member dies without a plan covers the ownership side.

What happens to a single-member LLC after its owner dies?

A single-member LLC dissolves unless the operating agreement or a timely designation of a new member keeps it going, and a dissolved LLC must pay its creditors before its owners get anything.

Under Minn. Stat. § 322C.0701, subd. 1, dissolution occurs on “(1) an event or circumstance that the operating agreement states causes dissolution” or on “(3) following the admission of the initial member or members, the passage of 90 consecutive days during which the company has no members.” Minn. Stat. § 322C.0401, subd. 4 lets a new member come in “if, within 90 consecutive days after the company ceases to have any members,” the last member “or the legal representative of that person, designates a person to become a member” and that person consents. Check the current text of both sections before relying on that period.

Once dissolved, “the company continues after dissolution only for the purpose of winding up” under Minn. Stat. § 322C.0702, subd. 1. Winding up means the company “shall discharge the company’s debts, obligations, or other liabilities” (subdivision 2), and where the LLC has no members, “the legal representative of the last person to have been a member may wind up the activities of the company” (subdivision 3). The payment order is set by Minn. Stat. § 322C.0707: under subdivision 1 the company “must apply its assets to discharge its obligations to creditors,” and only “After a limited liability company complies with subdivision 1” does subdivision 2 distribute “any surplus” to members and holders of transferable interests. If the LLC owned real estate, a docketed judgment is, under Minn. Stat. § 548.09, subd. 1, “a lien, in the amount unpaid, upon all real property in the county then or thereafter owned by the judgment debtor,” though registered land needs a separate recording. The same subdivision provides that “The judgment survives, and the lien continues, for ten years after its entry”; check its current text before relying on that period. On the family’s side of the same event, see who takes over a Minnesota business when the owner dies.

How can a creditor recover LLC money paid to the owner or the heirs?

Through Minnesota’s voidable-transactions act. A court can undo an LLC payment to its owner or heirs made “with actual intent to hinder, delay, or defraud any creditor,” or, as to a creditor “whose claim arose before the transfer was made,” made without reasonably equivalent value while the LLC was insolvent or that left it insolvent, and enter judgment against the recipient up to the value received.

When I answered that viewer’s question, I pointed to the sale proceeds. If the LLC sold its building and equipment and paid the money out to its owner or the owner’s family instead of paying the judgment, the judgment against the empty company may be worth little, but the people who received the money can be pursued. Minn. Stat. § 513.44 makes a transfer voidable if made “with actual intent to hinder, delay, or defraud any creditor of the debtor,” and among the factors a court may consider are whether “the transfer or obligation was to an insider,” whether “before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit,” and whether “the transfer was of substantially all the debtor’s assets.” Separately, Minn. Stat. § 513.45 makes a transfer voidable as to an existing creditor if the debtor made it “without receiving a reasonably equivalent value in exchange” and “was insolvent at that time” or became insolvent as a result.

The remedies include “avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim” under Minn. Stat. § 513.47, and a creditor with a judgment may, “if the court so orders,” levy execution on the asset transferred or its proceeds. Under Minn. Stat. § 513.48, the creditor “may recover judgment for the value of the asset transferred, as adjusted under paragraph (c), or the amount necessary to satisfy the creditor’s claim, whichever is less,” against “the first transferee of the asset or the person for whose benefit the transfer was made.” The same section shields a person “that took in good faith and for a reasonably equivalent value given the debtor,” which protects a buyer who paid the LLC for its equipment, not an heir who gave the LLC nothing. Minnesota’s voidable-transactions act (sections 513.41 to 513.51) has no time-limit section of its own, so for the deadline on a voidable-transfer claim, look to the limitations provisions of Minn. Stat. chapter 541 promptly. My page on fraudulent transfer claims covers the claim in more depth.

The LLC act adds its own limit. Minn. Stat. § 322C.0405, subd. 1 provides that an LLC “may not make a distribution if after the distribution” it “would not be able to pay its debts as they become due.” A person who received a distribution knowing it violated that limit “is personally liable to the limited liability company” for the excess under Minn. Stat. § 322C.0406, subd. 3. That liability runs to the company, not to you, and subdivision 5 sets its own time bar, so for distributions made before dissolution, the voidable-transactions act is the route that gives the creditor a claim in its own name. More on the company-side claim is on my page about improper distributions.

When can a creditor collect from heirs who received assets after dissolution?

When a dissolved LLC hands its remaining assets to its members or transferees, a creditor whose claim is not barred can enforce it against each recipient, but only up to that person’s share of the claim or what they received, whichever is less.

Minn. Stat. § 322C.0704, subd. 4 allows enforcement “(1) against a dissolved limited liability company, to the extent of its undistributed assets,” and “(2) if assets of the company have been distributed after dissolution, against a member or transferee to the extent of that person’s proportionate share of the claim or of the assets distributed to the member or transferee after dissolution, whichever is less, but a person’s total liability for all claims under this clause does not exceed the total amount of assets distributed to the person after dissolution.” An heir holding the deceased owner’s interest is a transferee, so this subdivision reaches the heir to the extent of what the heir received after dissolution.

Watch for dissolution notices, because they can bar your claim. Under Minn. Stat. § 322C.0703, subd. 2, a dissolved LLC “may in a record notify its known claimants of the dissolution,” and the notice must “state that the claim will be barred if not received by the deadline.” If the company receives a timely claim and rejects it, subdivision 3 bars the claim where “the company causes the claimant to receive a notice in a record stating that the claim is rejected and will be barred unless the claimant commences an action against the company to enforce the claim within 90 days after the claimant receives the notice” and the claimant does not sue in time; check the current text of that section. Subdivision 4 provides that the section “does not apply to a claim based on an event occurring after the effective date of dissolution or a liability that on that date is contingent.” A dissolved LLC also “may publish notice of its dissolution” under § 322C.0704, subd. 1, and for the claimants that section lists, a published notice bars claims not enforced by an action within the period subdivision 3 sets. A creditor who receives a notice of dissolution should read its deadline the day it arrives and respond in writing.

When does the owner’s estate have to pay the LLC’s judgment?

Only when the owner was personally liable for the debt, such as through a personal guaranty the owner signed, a court’s decision to pierce the LLC’s veil, or a voidable transfer of LLC money to the owner. Even then, you collect through the probate process.

Veil piercing is case law. Minn. Stat. § 322C.0304, subd. 3 provides that “the case law that states the conditions and circumstances under which the corporate veil of a corporation may be pierced under Minnesota law also applies to limited liability companies,” with one exception in subdivision 2: a failure “to observe formalities relating exclusively to the management of its internal affairs” is not a ground. The leading corporate case is Victoria Elevator Co. of Minneapolis v. Meriden Grain Co., 283 N.W.2d 509 (Minn. 1979), where the Minnesota Supreme Court affirmed a shareholder’s personal liability for a default judgment against his corporation, which had no assets left. The court listed factors including “insufficient capitalization for purposes of corporate undertaking,” “siphoning of funds by dominant shareholder,” and “existence of corporation as merely facade for individual dealings,” and stated that “Disregard of the corporate entity requires not only that a number of these factors be present, but also that there be an element of injustice or fundamental unfairness.” My page on piercing the veil in Minnesota walks through the factors.

A claim against the owner then goes through the estate. Under Minn. Stat. § 524.3-104, “No proceeding to enforce a claim against the estate of a decedent or the decedent’s successors may be revived or commenced before the appointment of a personal representative.” Minn. Stat. § 524.3-804 lets you present the claim in writing to the personal representative or file it with the court administrator, and “No presentation of claim is required in regard to matters claimed in proceedings against the decedent which were pending at the time of death.” A creditor may instead sue the personal representative, but “the commencement of the proceeding must occur within the time limited for presenting the claim,” and if a presented claim is disallowed, “no proceeding thereon may be commenced more than two months after the personal representative has mailed a notice of disallowance.” Check the current text of that section when calendaring either date.

Under Minn. Stat. § 524.3-803, claims that arose before the death “are barred against the estate, the personal representative, and the heirs and devisees of the decedent, unless presented as follows,” and the section lists three periods: “(1) in the case of a creditor who is only entitled, under the United States Constitution and under the Minnesota Constitution, to notice by publication under section 524.3-801, within four months after the date of the court administrator’s notice to creditors which is subsequently published pursuant to section 524.3-801;” “(2) in the case of a creditor who was served with notice under section 524.3-801(c), within the later to expire of four months after the date of the first publication of notice to creditors or one month after the service;” and “(3) within one year after the decedent’s death, whether or not notice to creditors has been published or served under section 524.3-801.” Check that section’s current text the day you learn of the death. If the estate has already been distributed, Minn. Stat. § 524.3-1004 provides that “After assets of an estate have been distributed and subject to section 524.3-1006, an undischarged claim not barred may be prosecuted in a proceeding against one or more distributees,” and that “No distributee shall be liable to claimants for amounts in excess of the value of the distributee’s distribution as of the time of distribution.” Minn. Stat. § 524.3-1006 sets its own limitation on a proceeding against distributees, so check its current text as well. My overview of Minnesota probate explains the court process.

What should a creditor check first after learning the agent died?

Check the public records that show who now controls the LLC, what it still owns, and whether an estate has been opened. Those records decide which of the routes above is open to you.

1. The Secretary of State record. It shows the LLC’s status, registered office, and agent. A dissolution or a new agent filing tells you who is acting for the company.
2. Whether the agent was also the owner. If so, the owner’s death triggers the dissociation and dissolution rules described above, and the estate controls the interest.
3. Real estate and your judgment lien. Under Minn. Stat. § 548.09, subd. 1, the lien runs “From the time of docketing” against the debtor’s real property in each county where the judgment is docketed, though registered land needs a separate recording. If the LLC sold a building after you docketed, the sale’s title records show whether the lien was paid at closing.
4. A debtor examination. Once an execution “is returned unsatisfied, in whole or in part, the judgment creditor is entitled to an order from the judge of the district court” for an examination under Minn. Stat. § 575.02, which is the place to ask where the sale proceeds went.
5. The probate court file. A personal representative must be appointed before you can pursue a claim against the estate (§ 524.3-104). If no one has opened probate, a creditor may seek appointment as personal representative 45 days after the death (Minn. Stat. § 524.3-203(a)(6)), and a claim not presented within one year after the death is barred whether or not notice to creditors was published or served (§ 524.3-803(3)). Under Minn. Stat. § 524.3-801 the personal representative “shall, within three months after the date of the first publication of the notice, serve a copy of the notice upon each then known and identified creditor.”
6. Any notice of dissolution you received. Its deadline should go on your calendar, and the answer should go back in writing.

My guide to collecting a Minnesota judgment covers garnishment and execution against the LLC’s own property. Whether the buyer of the LLC’s assets is liable is a separate question, covered on my page about successor liability in asset sales.

The death of an LLC’s registered agent changes who receives papers, not who owes the judgment. Your judgment still runs against the company, and the heirs owe nothing just for inheriting the interest. The money you can reach is the money that moved: distributions and sale proceeds paid to the owner or heirs, and assets handed out after dissolution, each capped at what the recipient received, plus the owner’s estate when the owner was personally liable. Acting early matters because dissolution notices and probate deadlines can cut off a claim that would otherwise succeed. If you would like a second set of eyes on a judgment against an LLC whose owner or agent has died, email Aaron Hall at aaron@aaronhall.com with a brief description and a copy of the judgment. More on family-owned companies is on my family business page.