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

At a glance

Requirements one by one

Company payments and excess capital advances

Utah Code § 16-20-408(1) says the LLC “shall reimburse” a member in a member-managed company or a manager in a manager-managed company for a payment made in company activities if the payer complied with §§ 16-20-407 and -409. Section 16-20-407(6) separately requires reimbursement of a member's advance beyond agreed capital. Subsection (7) treats a qualifying member payment or advance as an interest-bearing company loan from its payment date. This member-to-company advance differs from a claim-expense advance under § 16-20-408(3).

Indemnity for claims

Utah Code § 16-20-408(2) says the LLC “shall indemnify and hold harmless” a person for claims, demands, debts, obligations and other liabilities by reason of former or present member or manager capacity, unless the liability arises from breach of § 16-20-405, -407 or -409.

Defense advances and insurance

Utah Code § 16-20-408(3) permits an ordinary-course advance of reasonable expenses, including attorney's fees and costs, on a capacity-linked claim if the person promises repayment upon an ultimate determination that subsection (2) indemnity is unavailable. Subsection (4) authorizes insurance for member or manager capacity or status liability even where the operating agreement could not eliminate or limit liability to the LLC for the conduct. The statute authorizes purchase; policy terms determine coverage.

Agreement and decisions

Utah Code § 16-20-107(1)–(2) makes the operating agreement govern internal relations, manager duties and company affairs, with statutory rules where it is silent. Subsection (3) limits elimination of loyalty, care and good-faith duties and exoneration for bad faith, willful misconduct or recklessness. Section 16-20-407(2)–(3) vests ordinary management in members or managers according to management form. Section 16-20-408 states no special indemnity approval vote or court route.

What trips people up

Current section number. S.B. 40 § 297 made the Title 16 recodification effective October 1, 2026. Older Title 48 citations refer to superseded provisions.

Two kinds of advances. An excess-capital advance by a member creates an interest-bearing company loan under § 16-20-407(6)–(7); a company advance of reasonable claim expenses under § 16-20-408(3) depends on a repayment promise and ultimate indemnity entitlement.

Common questions

Does a former manager remain within the claim rule? Yes. Utah Code § 16-20-408(2)–(3) expressly covers former or present member or manager capacity for indemnity and possible claim-expense advancement.

Must an LLC advance claim expenses? No. Section 16-20-408(3) says “may,” conditions an advance on a repayment promise, and limits it to reasonable expenses in the ordinary course.

Statutes and sources

• Utah Code § 16-20-107(1)–(2): “(1) Except as otherwise provided in Subsections (3) and (4), the operating agreement governs: (a) relations among the members as members and between the members and the limited liability company; (b) the rights and duties under this chapter of a person in the capacity of manager; (c) the activities and affairs of the limited liability company and the conduct of those activities and affairs; and (d) the means and conditions for amending the operating agreement. (2) To the extent the operating agreement does not provide for a matter described in Subsection (1), this chapter governs the matter.” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-107(3)(e)–(g): “(e) eliminate the duty of loyalty or the duty of care, except as otherwise provided in Subsection (4); (f) eliminate the contractual obligation of good faith and fair dealing under Subsection 16-20-409(4), but the operating agreement may prescribe the standards, if not unconscionable or against public policy, by which the performance of the obligation is to be measured; (g) relieve or exonerate a person from liability for conduct involving bad faith, willful misconduct, or recklessness;” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-407(2)(a): “(2) In a member-managed limited liability company, the following rules apply: (a) Except as otherwise provided in this chapter, the management and conduct of the limited liability company are vested in the members.” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-407(3)(a): “(3) In a manager-managed limited liability company, the following rules apply: (a) Except as expressly provided in this chapter, any matter relating to the activities and affairs of the limited liability company is decided exclusively by the manager, or, if there is more than one manager, by a majority of the managers.” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-407(6)–(7): “(6) A limited liability company shall reimburse a member for an advance to the limited liability company beyond the amount of capital the member agreed to contribute. (7) A payment or advance made by a member which gives rise to an obligation of the limited liability company under Subsection (6) or Subsection 16-20-408(1) constitutes a loan to the limited liability company which accrues interest from the date of the payment or advance.” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-408(1): “(1) A limited liability company shall reimburse a member of a member-managed limited liability company or the manager of a manager-managed limited liability company for any payment made by the member or manager in the course of the member's or manager's activities on behalf of the limited liability company, if the member or manager complied with Sections 16-20-407 and 16-20-409 in making the payment.” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-408(2): “(2) A limited liability company shall indemnify and hold harmless a person with respect to any claim or demand against the person and any debt, obligation, or other liability incurred by the person by reason of the person's former or present capacity as a member or manager, if the claim, demand, debt, obligation, or other liability does not arise from the person's breach of Section 16-20-405, 16-20-407, or 16-20-409.” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-408(3): “(3) In the ordinary course of its activities and affairs, a limited liability company may advance reasonable expenses, including attorney's fees and costs, incurred by a person in connection with a claim or demand against the person by reason of the person's former or present capacity as a member or manager, if the person promises to repay the limited liability company if the person ultimately is determined not to be entitled to be indemnified under Subsection (2).” official enacted text (accessed 2026-10-01).
• Utah Code § 16-20-408(4): “(4) A limited liability company may purchase and maintain insurance on behalf of a member or manager of the limited liability company against liability asserted against or incurred by the member or manager in that capacity or arising from that status even if, under Subsection 16-20-107(3)(g), the operating agreement could not eliminate or limit the person's liability to the limited liability company for the conduct giving rise to the liability.” official enacted text (accessed 2026-10-01).
• 2026 Utah Laws ch. 93 (SB 40), § 297: “Section 297. Effective Date. This bill takes effect on October 1, 2026.” official enacted text (accessed 2026-10-01).