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

At a glance

Requirements one by one

Company power and covered people

Ind. Code § 23-18-2-2(14) authorizes an LLC to “indemnify and hold harmless” any member, manager, agent, or employee against claims and demands, subject to standards and restrictions in a written operating agreement. Its stated exclusion concerns action or inaction by a member, agent, or employee constituting willful misconduct or recklessness; the sentence does not list a manager in that exclusion phrase. This is a company power under the opening of § 23-18-2-2, which also yields to limits in the articles.

Written-agreement protection

Ind. Code § 23-18-4-4(a)(2) permits a written operating agreement to provide indemnity for a member or manager's judgments, settlements, penalties, fines, or expenses in a proceeding because the person “is or was” a member or manager. Subsection (a)(1) separately permits the written agreement to modify member or manager duties or liability. The statute does not impose one uniform statutory entitlement or prescribe an advance before a claim's disposition.

Other payments and insurance

The LLC's general powers include contracting under § 23-18-2-2(6) and making payments that further its business under § 23-18-2-2(16). Those provisions can support a company-expense reimbursement arrangement or purchase of a policy, subject to its governing documents and other applicable law. The indemnity and written-agreement clauses do not themselves set an advance repayment promise or decide what an insurance policy covers.

What trips people up

The exclusion in § 23-18-2-2(14) names a member, agent, or employee, while the initial list of people the company may indemnify also names managers. Do not silently insert “manager” into the exclusion. The written-agreement route in § 23-18-4-4(a)(2) expressly reaches a former member or manager, but the general power clause does not state a separate former-status test.

Common questions

Does the Act require the LLC to repay every bill a member pays for it? The cited powers permit business payments and contracts but state no separate mandatory formula for that type of reimbursement. Check the agreement and transaction.

Can an operating agreement cover a former manager's proceeding? Yes, a written agreement may provide indemnity when the proceeding arises because the person “was” a manager under § 23-18-4-4(a)(2).

Does the indemnity power decide insurance coverage? No. The policy terms govern a claim, and the cited LLC provisions do not specify policy coverage.

Statutes and sources

• Ind. Code § 23-18-2-2, especially subsections (6), (14), and (16): general powers, indemnity, contracts, and business payments. Official 2026 Code, accessed 2026-09-23.
• Ind. Code § 23-18-4-4(a)(1)-(2): written-agreement modification and current/former member or manager proceeding indemnity. Official 2026 Code, accessed 2026-09-23.