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

At a glance

Requirements one by one

Governing LLC law and scope

Texas places the LLC's specific powers to indemnify, advance or reimburse expenses, and arrange insurance together in § 101.402. Section 8.002(a) expressly excludes LLCs from Chapter 8's ordinary indemnification procedure. Its subsection (b) lets an LLC adopt Chapter 8 provisions through its governing documents, but adoption must come from those documents; it is not an automatic statutory default. The narrow negligence rule in § 8.005 also expressly reaches LLCs.

Covered people and capacities

Section 101.402(b) says “person” includes a member, manager, officer, or assignee of a membership interest. The word “includes” leaves the statutory permission broader than that list. A company's documents can specify which capacities they protect under §§ 101.052 and 8.002(b).

Company-payment reimbursement

The text allows an LLC to “reimburse expenses incurred by a person” (§ 101.402(a)(2)). It does not create a separate mandatory right for someone who pays a company bill or specify that the expense must be incurred in a named company capacity. The company agreement and the facts of the payment matter to any actual request.

Indemnification and expense advancement

Section 101.402(a)(1)-(2) uses “may” for both indemnification and advance payment. It gives no default claim category, conduct test, repayment undertaking, security rule, or payment deadline. Chapter 8's detailed conditions do not automatically supply those missing terms because § 8.002 excludes LLCs.

Insurance purchase authority

The LLC may “purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless a person” (§ 101.402(a)(3)). That permission does not describe the contents of an actual policy or guarantee that it will pay a particular claim.

Agreement control and survival

The company agreement governs internal affairs and ordinarily may modify statutory defaults (§ 101.052(a)-(d)). Section 101.054 identifies provisions that cannot be waived or modified and requires an affected outside person's consent for a change to a statutory right granted to that person. For any continuation term after departure, read the company's governing documents.

What trips people up

Chapter 8 contains detailed indemnification rules for other entities, including court and approval routes. A Texas LLC should not be assigned those rules merely because both chapters appear in the Business Organizations Code: § 8.002(a) is the express exclusion. Conversely, § 8.005(b) does apply to LLC governing documents and removes an express-and-conspicuous-statement requirement for an indemnification or exculpation provision covering negligence.

Common questions

Does the statute require the LLC to repay every expense a manager incurs? No. Section 101.402(a)(2) grants permission; it does not say every expense must be reimbursed. The agreement and the particular expense need review.

Must an advance be backed by a repayment promise? Section 101.402 does not prescribe one. An LLC may put conditions in its company agreement under § 101.052.

Does buying insurance prove that a claim is covered? No. Section 101.402(a)(3) grants purchase authority; the policy and the facts determine coverage.

Statutes and sources

• Tex. Bus. Orgs. Code § 101.402(a)-(b): “A limited liability company may: (1) indemnify a person; (2) pay in advance or reimburse expenses incurred by a person; and (3) purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless a person.” Official text, accessed 2026-09-23.
• Tex. Bus. Orgs. Code § 8.002(a)-(b): “this chapter does not apply to a: (1) general partnership; or (2) limited liability company.” Its subsection (b) permits governing documents to adopt Chapter 8 provisions. Official text, accessed 2026-09-23.
• Tex. Bus. Orgs. Code § 101.052(a)-(d): “the company agreement of a limited liability company governs” specified relations and internal affairs, subject to § 101.054. Official text, accessed 2026-09-23.
• Tex. Bus. Orgs. Code § 101.054(a), (d): “the following provisions may not be waived or modified in the company agreement of a limited liability company” subject to the section's exceptions. Official text, accessed 2026-09-23.
• Tex. Bus. Orgs. Code § 8.005(a)-(b): the negligence-indemnity rule applies “notwithstanding Section 8.002” to an LLC. Official text, accessed 2026-09-23.