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

At a glance

Requirements one by one

Current LLC authority and covered people

Section 450.4216(a) permits an LLC, unless its operating agreement provides otherwise, to “indemnify, hold harmless, and defend” a member, manager, or other person against losses, expenses, claims, and demands. The verb is “may,” so the section grants authority rather than an automatic payment right. Section 450.4401(b) gives members of a member-managed company the manager indemnification rights and limitations described in the Act.

Conduct the LLC cannot indemnify

Section 450.4216(a) bars indemnifying a person for conduct described in § 450.4407(a)-(c): receipt of an improper financial benefit, liability under the unlawful-distribution provision, or a knowing violation of law. The distribution category is substantive: § 450.4308(1) addresses a member or manager who voted for or assented to an excess distribution contrary to the agreement or statutory limit, when the stated duty condition is met. Section 450.4407(d)'s separate pre-effective-clause limit concerns exculpation and is not in § 450.4216(a)'s indemnity cross-reference.

Insurance and expenses

Section 450.4216(b) separately permits the LLC to buy and maintain insurance for a member, manager, or other person against asserted or incurred liability or expense “whether or not” it could indemnify that person. The power to defend and cover expenses under subsection (a) does not itself prescribe a defense-expense advance, a repayment undertaking, or a payment date. Actual coverage depends on the policy.

What trips people up

Older material may cite former § 450.4408 for manager indemnification. The current official code marks that section repealed effective December 16, 2010; § 450.4216 is the current general LLC power. Do not treat the old section's wording as an additional current procedure.

Common questions

Does the statute require repayment of every company bill a member pays? Section 450.4216(a) permits protection for losses and expenses but does not impose a separate mandatory company-payment reimbursement rule. The agreement and payment facts matter.

Can the LLC insure a risk it cannot itself indemnify? Yes. Section 450.4216(b) expressly permits insurance whether or not subsection (a) allows company indemnity; the policy still controls coverage.

Are former managers expressly listed? Section 450.4216 names a member, manager, or other person without a distinct former-office rule. Examine the operating agreement and the person's role and claim.

Statutes and sources

• MCL § 450.4216(a)-(b): the LLC may “Indemnify, hold harmless, and defend” and may “Purchase and maintain insurance,” with the conduct exclusion and insurance extension stated there. Official text, accessed 2026-09-23.
• MCL § 450.4407(a)-(c): the nonexculpable categories include improper financial benefit, § 308 liability, and knowing law violation. Official text, accessed 2026-09-23.
• MCL § 450.4308(1): identifies the excess-distribution liability cross-referenced by § 450.4407(b). Official text, accessed 2026-09-23.
• MCL § 450.4401(a)-(b): member-managed members have manager indemnification rights and limitations under the Act. Official text, accessed 2026-09-23.
• MCL § 450.4408: “Repealed. 2010, Act 290, Imd. Eff. Dec. 16, 2010.” Official current repeal entry, accessed 2026-09-23.