LLC Reimbursement, Indemnification, Advancement, and Insurance Requirements in Arizona
At a glance
| Governing LLC law and scope | A.R.S. § 29-3408 separates mandatory company-payment reimbursement/indemnity from optional advances, expanded protection, and insurance |
|---|---|
| Covered people and capacities | A/D: present/former member-managed members or manager-managed managers; B/C: present/former member or manager; E: member/manager (§ 29-3408) |
| Company-payment reimbursement | Shall reimburse qualifying company-activity payment by covered present/former manager/member on compliance with referenced duties as modified (§ 29-3408(A)) |
| Indemnification and conduct limits | Shall indemnify member/manager capacity claims, demands, debts, obligations, liabilities absent listed agreement/statutory breach; D permits more with unanimous informed approval (§ 29-3408(B),(D)) |
| Expense advancement and repayment | May advance reasonable claim/demand expenses including fees/costs; recipient must repay if ultimately not entitled under B (§ 29-3408(C)) |
| Insurance purchase authority | May insure member/manager capacity or status liability even if agreement could not eliminate/limit underlying company liability (§ 29-3408(E)) |
| Approval and court procedure | All members must approve after material-fact disclosure for D protection concerning violation; no special court route in § 29-3408 |
| Agreement control and survival | A/B/D apply referenced duties as agreement modifies them; D needs informed unanimity for violations; A-D expressly name former roles (§ 29-3408) |
| What the statute does not decide | Capacity, activity, duty compliance/breach, reasonableness, ultimate indemnity, member approval, and policy terms matter (§ 29-3408) |
Requirements one by one
Company-payment reimbursement
A.R.S. § 29-3408(A) says the LLC “shall reimburse” a present or former member of a member-managed company or manager of a manager-managed company for a payment made in the course of activities on the company's behalf. The person must have complied with §§ 29-3405, 29-3407, and 29-3409 as modified by the operating agreement when making the payment. The subsection addresses a payment for company activity, separately from a claim against the person.
Indemnification
A.R.S. § 29-3408(B) says the LLC “shall indemnify and hold harmless” a person against a claim, demand, debt, obligation, or other liability incurred because of present or former member or manager capacity, if it does not arise from a breach of the agreement or one of the three referenced sections as modified by the agreement. Subsection (D) supplies a separate permissive route for certain otherwise excluded conduct, with a special approval condition explained below.
Expense advances
A.R.S. § 29-3408(C) permits advance payment of reasonable expenses, including attorney fees and costs, connected with a claim or demand because of a person's present or former member or manager capacity. The person “must repay the company” if ultimately determined not entitled to indemnity under subsection (B). The statute does not specify an additional written undertaking or financial-capacity test.
Insurance
A.R.S. § 29-3408(E) permits insurance for a member or manager against liability in that capacity or arising from that status, even if the agreement could not eliminate or limit the person's liability to the company for the conduct. The permission to buy a policy does not decide whether a particular loss is covered.
What trips people up
A.R.S. § 29-3408(D) is broader than the mandatory reimbursement and indemnity routes. It permits protection for a present or former member-managed member or manager-managed manager even where an act, omission, or transaction violates the agreement or the cited sections, but requires approval of all members after disclosure of all material facts for protection with respect to that violation. A routine manager decision alone cannot satisfy that express condition.
Common questions
Can a manager of a member-managed company claim the mandatory company-payment reimbursement? Subsection (A) names members of member-managed companies and managers of manager-managed companies. Check the person's actual role and the agreement before applying that subsection.
Does a former member lose all protection? No. Subsections (A) through (D) expressly cover former status for the roles they name, subject to each route's conditions.
Does an advance become final indemnity? No. Subsection (C) requires repayment if the person is ultimately determined not entitled under subsection (B).
Statutes and sources
- A.R.S. § 29-3408(A)-(E): company-payment reimbursement, indemnity, expense advances, special approval, and insurance. Official current text, accessed 2026-09-23.
Source links
Every statute quoted above, linked, with the date we checked it.
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