Unpaid LLC Distributions in New York: Each Missed Payment Starts a New Statute of Limitations

Missed LLC Distributions in New York: Why the Clock May Still Be Running

If you are a member or investor in a New York LLC and have not been paid distributions promised to you, the statute of limitations may still be open—even years later. Many LLC members assume that if an agreement was breached long ago, they are “out of luck.” That is often wrong when the obligation involves recurring profit distributions. New York courts repeatedly hold that each failure to pay a required distribution is its own breach of contract, triggering a new six‑year statute of limitations. This concept—sometimes called the “recurring obligation” or “continuing performance” rule—is especially important in disputes involving LLC distributions, profit sharing, and repayment of member loans.

This article explains how the rule works, why it matters, and when you should consult a lawyer.

1. The General Rule: Six Years for Breach of Contract in New York

Under CPLR § 213(2), breach of contract claims in New York must be brought within six years. Ordinarily, a breach of contract claim accrues when the breach occurs, not when the damage is discovered. If a party breaches once and never performs again, the clock usually starts on that single breach. But that is not the whole story.

2. Recurring Payment Obligations Are Different

When a contract requires ongoing or periodic performance, New York law treats each failure to perform as a separate breach. In other words: If a contract requires continuing payments, each missed payment can start a new six‑year clock. Courts distinguish between one‑time breaches with lasting consequences (time‑barred after six years), and independent, recurring breaches, where each nonpayment creates its own claim.

3. LLC Distributions Are Classic “Recurring Obligations”

New York courts have consistently recognized that LLC members’ rights to distributions are recurring contractual obligations, not one‑time promises.

Key Rule for LLC Members

If an LLC agreement (written or oral) entitles a member to:

• a percentage of profits,

• periodic distributions,

• sale proceeds,

• or returns on invested capital,

then each time the LLC fails to pay when payment appears due, a new breach occurs.

4. What the Courts Say:

Knobel v. Shaw (1st Dept. 2011)

The First Department held that where a contract required payment of a percentage of profits, the obligation was recurring, and the breach “accrued each time [the defendant] allegedly breached” by failing to pay profits. That means the plaintiff could sue for any missed payments within six years, even though the relationship began much earlier.

Lotwala v. Dhabuwala (Sup. Ct. N.Y. County 2022)

This case squarely involved LLC investments and unpaid distributions.

The court rejected the argument that claims accrued when the plaintiff originally invested (2001–2005). Instead, the duty to share profits and make distributions was continuing each unpaid distribution accrued when payment became due, not when the investment was made

Sprecher v. Miller (Sup. Ct. N.Y. County 2024)

This court applied Knobel directly in the context of withheld distributions: Even though the initial breach occurred earlier, subsequent failures to make distribution payments were new breaches, each restarting the statute of limitations. The court allowed claims to proceed for distributions due within six years of suit, even though earlier nonpayments were time‑barred.

5. What This Means for LLC Members

 You May Still Have Valid Claims If:

• You were entitled to distributions year after year

• The LLC continued operating or generating profits

• Payments were skipped, reduced, or withheld

• No clear repudiation of your rights occurred

Call a Lawyer:

• You receive K‑1s showing profits but no cash

• Other members were paid but you were not

• Distributions stopped without explanation

• You suspect self‑dealing or diversion of profits

• You believe profits were generated but never shared

Because each year matters, delay can permanently forfeit older claims.