LLC Reimbursement, Indemnification, Advancement, and Insurance Requirements in South Dakota
At a glance
| Governing LLC law and scope | SDCL §§ 47-34A-403, -103 and -404.1 govern domestic LLC payment/liability, insurance, agreement and ordinary management |
|---|---|
| Covered people and capacities | Member or manager for ordinary-course/preservation payments/liabilities and capacity/status insurance; member for excess contribution advance; no express former-status route in § 47-34A-403 |
| Company-payment reimbursement | Must reimburse member/manager ordinary-course or preservation payment and member advance beyond agreed contribution; qualifying member sums accrue interest (§ 47-34A-403(a)–(c)) |
| Indemnification and conduct limits | Must indemnify member/manager liability incurred in ordinary course or preserving business/property (§ 47-34A-403(a)); no separate success or conduct test there |
| Expense advancement and repayment | § 47-34A-403(b) addresses member advance to the company, not interim defense expenses; no defense-cost undertaking specified there |
| Insurance purchase authority | May insure member/manager capacity or status liability even when agreement cannot eliminate underlying company liability (§ 47-34A-403(e)) |
| Approval and court procedure | § 47-34A-403 states no special indemnity vote/court application; ordinary member/manager majority rules in § 47-34A-404.1(a)(2), (b)(2) |
| Agreement control and survival | Agreement governs member/manager/company relations, chapter fills gaps (§ 47-34A-103(a)); loyalty and good-faith limits in § 47-34A-103(b), care variation in (c); § 47-34A-403 names members and managers without a departure procedure |
| What the statute does not decide | Actual role, business nexus, liability, agreement terms and policy coverage require case-specific review |
Requirements one by one
Company payments, liabilities and member advances
S.D. Codified Laws § 47-34A-403(a) requires reimbursement of a member's or manager's payment and indemnity for that person's liability incurred in ordinary company business or to preserve its business or property. Section 47-34A-403(b) separately requires reimbursement of a member's advance beyond the agreed contribution. Under § 47-34A-403(c), qualifying member sums are company loans bearing interest from payment or advance. The loan sentence names members even though subsection (a) also names managers.
Insurance and agreement boundaries
§ 47-34A-403(e) permits insurance for member or manager capacity or status liability even when an agreement could not eliminate the person's underlying liability to the LLC. Under § 47-34A-103(a), the agreement regulates company relations and the chapter fills gaps. § 47-34A-103(b)(1) protects loyalty, § 47-34A-103(b)(2) protects good faith and fair dealing, and § 47-34A-103(c)(2) allows a reduction of care if not manifestly unreasonable. Ordinary member or manager decisions follow § 47-34A-404.1(a)(2) or § 47-34A-404.1(b)(2), as applicable.
What trips people up
The member's “advance to the company” in § 47-34A-403(b) concerns excess contribution, not interim defense costs. Section 47-34A-403 does not specify a defense-expense undertaking, special indemnity approval, court application or former-status protection. Insurance authority in subsection (e) does not establish policy coverage.
Common questions
Can the LLC insure liability its agreement cannot eliminate? Yes. Section 47-34A-403(e) expressly permits purchase in that situation, subject to the policy's terms.
Does a manager's reimbursed payment automatically become an interest-bearing loan? Section 47-34A-403(a) covers managers in reimbursement, but subsection (c)'s loan treatment describes a member's payment or advance.
Statutes and sources
- S.D. Codified Laws § 47-34A-103(a), (b)(1)–(2), (c)(2): the agreement governs relations subject to the specified loyalty, good-faith and care rules. Official current statute, accessed 2026-09-23.
- S.D. Codified Laws § 47-34A-403(a)–(c), (e): “A limited liability company shall reimburse a member or manager for payments made and indemnify a member or manager for liabilities incurred” within the stated scope; subsection (e) authorizes status insurance. Official current statute, accessed 2026-09-23.
- S.D. Codified Laws § 47-34A-404.1(a)(2), (b)(2): ordinary member or manager decision rules. Official current statute, accessed 2026-09-23.
Source links
Every statute quoted above, linked, with the date we checked it.
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