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

At a glance

Requirements one by one

Proceeding indemnity and covered people

RCW § 25.15.041(1) permits an LLC to indemnify a member or manager for judgments, settlements, penalties, fines, or expenses incurred in a proceeding because the person “is, or was” a member or manager. Subsection (2) extends indemnity and advances to a nonmember officer, employee, or agent to the same extent. Subsection (3) includes counsel fees in expenses and covers threatened, pending, and completed civil, criminal, administrative, and investigative proceedings.

Advance and conduct restrictions

The company may “obligate itself to advance or reimburse expenses” of a party to a proceeding. RCW § 25.15.041(1) does not state a separate repayment undertaking or mandatory company-payment formula for an ordinary bill. The indemnity bar applies where acts or omissions have been finally adjudged intentional misconduct, a knowing violation of law, or conduct violating RCW § 25.15.231's distribution limits. RCW § 25.15.018(3)(e) prevents an LLC agreement from authorizing indemnity that § 25.15.041 prohibits.

Insurance and general powers

RCW § 25.15.031(2) gives the LLC the powers of an individual to do things necessary or convenient for its activities, unless its chapter or governing documents provide otherwise. Purchasing a policy can fall within that general business power. RCW § 25.15.041 states indemnity and expense-advance authority, but it does not decide whether an insurer covers a particular liability or whether the company may shift an otherwise nonindemnifiable loss to a policy. Those questions require the policy and other applicable law.

What trips people up

The proceeding expense provision is not a promise that the LLC must repay every company bill a member pays. It addresses a person's costs as a party to a proceeding. A separate expenditure should be tested under the company agreement and the transaction's terms. The misconduct bar uses a final-adjudication trigger, so an allegation alone does not satisfy the words of that bar.

Common questions

Can a former manager seek indemnity? Yes, the statute's capacity clause includes someone who “was” a manager, subject to the proceeding and conduct conditions.

Can the LLC cover a nonmember employee's defense expenses? Section 25.15.041(2) permits indemnity and expense advances for a nonmember officer, employee, or agent to the same extent as for a member or manager.

Does the Act prescribe a repayment promise for an advance? Section 25.15.041 authorizes an advance but does not prescribe an undertaking. The company's agreement may add terms.

Statutes and sources

• Wash. Rev. Code § 25.15.031(2): general LLC powers. Official text, accessed 2026-09-23.
• Wash. Rev. Code § 25.15.041(1)-(3): proceeding indemnity, expense advances, covered people, and definitions. Official text, accessed 2026-09-23.
• Wash. Rev. Code § 25.15.018(1)-(3)(e): agreement control and the prohibition on contrary indemnity. Official text, accessed 2026-09-23.
• Wash. Rev. Code § 25.15.231(1)-(2): distribution restrictions cross-referenced by the indemnity bar. Official text, accessed 2026-09-23.