LLC Reimbursement, Indemnification, Advancement, and Insurance Requirements in Colorado

At a glance

Requirements one by one

Company payments and liabilities

Colorado Revised Statutes § 7-80-407 uses two different verbs: an LLC “shall reimburse” a current or former member or manager for payments made and “indemnify” that person for liabilities incurred. Both routes require an ordinary-business or business/property-preservation connection and no violation of the person's duties to the LLC. A former manager who personally pays a qualifying company bill can therefore fall within the same text as a current manager; the person's status at the time of the later request alone does not answer the statutory conditions.

Agreement terms and duties

Section 7-80-108(1)(a) makes the operating agreement control over Article 80's defaults where the agreement is consistent with law. The limits in § 7-80-108(2) qualify that control. Under § 7-80-108(1.5), duties may be restricted or eliminated only when the provision is not manifestly unreasonable. The rule in § 7-80-108(2)(d) protects the obligation of good faith and fair dealing stated in § 7-80-404(3), while permitting reasonable performance standards. Read a proposed payment against the actual agreement and the duties that applied when the payment was made or the liability incurred.

Decision and payment procedure

For ordinary LLC decisions, § 7-80-401(1) uses a majority of members, or a majority of managers when the LLC has managers. Every member must consent to an agreement amendment or an act outside the ordinary course under subsection (2). Section 7-80-407 itself does not specify a separate disinterested approval, court-order, interim defense-advance, or repayment-undertaking process.

What trips people up

A defense bill, a company bill paid personally, and a liability incurred for the company can arise from the same dispute. Section 7-80-407 expressly ties reimbursement to a payment and indemnification to a liability; classify the requested payment before applying its ordinary-course, preservation, and duty-compliance conditions.

Section 7-80-104(1)(f) lets an LLC make contracts, and § 7-80-104(1)(m) gives powers necessary or convenient to its purposes. The rule in § 7-80-104(1)(k) ties indemnification to § 7-80-407. The general powers can support a policy purchase. What a purchased policy covers depends on its terms, including any exclusions or limits relevant to the claim.

Common questions

Does the statute cover an expense merely because an officer or employee paid it?

Section 7-80-407 names a person who is or was a member or manager. Any separate contractual right for a person serving only as an officer or employee must be checked in the governing documents; § 7-80-104's general powers do not insert that person into § 7-80-407.

Is an outside-course liability automatically excluded?

Section 7-80-407 separately includes liabilities incurred “for the preservation of its business or property.” Whether a particular liability meets that route and the duty-compliance condition depends on the event and the governing documents.

Statutes and sources

• Colo. Rev. Stat. § 7-80-104(1)(f), (k), (m): “Make contracts and guarantees”; “Indemnify a member or manager or former member or manager ... as provided in section 7-80-407”; and “Have and exercise all powers necessary or convenient” to the LLC's purposes. Official 2026 Title 7 PDF (accessed September 23, 2026).
• Colo. Rev. Stat. § 7-80-108(1)(a), (1.5), (2)(d): The agreement controls statutory defaults within the stated limits; restricted duties cannot be manifestly unreasonable, and the agreement cannot eliminate good faith and fair dealing. Official 2026 Title 7 PDF (accessed September 23, 2026).
• Colo. Rev. Stat. § 7-80-401(1)-(2): Ordinary decisions use the stated majority, while amendments and outside-course acts need each member's consent. Official 2026 Title 7 PDF (accessed September 23, 2026).
• Colo. Rev. Stat. § 7-80-404(3): Members and managers exercise rights consistently with the contractual obligation of good faith and fair dealing. Official 2026 Title 7 PDF (accessed September 23, 2026).
• Colo. Rev. Stat. § 7-80-407: The LLC “shall reimburse” qualifying payments and “indemnify” qualifying liabilities of present or former members and managers. Official 2026 Title 7 PDF (accessed September 23, 2026).