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

At a glance

Requirements one by one

Written indemnity and the covered proceeding

KRS 275.180(2) permits a written operating agreement to indemnify a member or manager for judgments, settlements, penalties, fines, or expenses incurred in a proceeding to which that person is a party because the person “is or was” a member or manager. The proceeding and capacity connection matter. The same section's subsection (1) separately allows a written agreement to limit monetary liability for duty breaches; a liability limit and payment of an existing liability are different mechanisms.

KRS 275.003(3) permits a written agreement to provide rights to any person, including a nonmember or nonparty, to the extent stated there. That general agreement route does not expand the persons expressly named in § 275.180(2). Section 275.003(7) keeps the obligation of good faith and fair dealing for members, managers, and agreement parties, although an agreement may set performance standards that are not manifestly unreasonable.

Powers and decisions

KRS 275.010(1) gives an LLC powers necessary or convenient to its business and affairs unless the Act, articles, or agreement provide otherwise. A policy purchase or other payment arrangement can be made under those general powers. The policy's terms determine whether a particular loss is covered.

KRS 275.175(1) defaults business decisions to a majority-in-interest of members or a simple majority of managers, each manager having one vote. For members, subsection (3) measures interests by the agreed value of contributions actually received and not returned, unless the articles, written agreement, or Act changes the rule. Section 275.180 does not add a special disinterested vote or court-approval route for indemnity.

What trips people up

Section 275.180(2) concerns expenses incurred in a proceeding. It does not establish mandatory repayment for a company bill paid personally, an interim defense-advance schedule, or a repayment-undertaking form. Identify the requested kind of payment and any separate agreement provision before treating an expense clause as an advance obligation.

A former member or manager can be within the express “is or was” phrase, but the phrase does not itself make every later request payable. The written term must cover the person, proceeding, and liability in question.

Common questions

Can an oral understanding supply the § 275.180 indemnity clause?

Section 275.180 says a written operating agreement may provide this indemnity. Any other claimed contractual right needs an independent basis; the statutory route itself specifies writing.

Does a member vote count one vote per member?

Not by default for this decision. Section 275.175(1), (3) uses majority-in-interest based on received, unreturned contribution value for members. Managers use a simple majority with one vote each, subject to valid governing terms.

Statutes and sources

• KRS 275.180: Written agreement authority for monetary-liability limits and indemnification of present or former members and managers in a capacity-linked proceeding. Official current section PDF (accessed September 23, 2026).
• KRS 275.010(1): General necessary-or-convenient LLC powers, subject to statutory and governing-document terms. Official current section PDF (accessed September 23, 2026).
• KRS 275.003(3), (7)-(8): Agreement rights for others, the good-faith obligation, and the statute's default role. Official current section PDF (accessed September 23, 2026).
• KRS 275.175(1), (3): Member and manager vote defaults and the contribution-value measure for member interests. Official current section PDF (accessed September 23, 2026).