Section 403. Member's and Manager's
Rights to Payments and Reimbursement

(a) A limited liability company shall reimburse a member or manager for payments made and indemnify a member or manager for liabilities incurred by the member or manager in the ordinary course of the business of the company or for the preservation of its business or property.

(b) A limited liability company shall reimburse a member for an advance to the company beyond the amount of contribution the member agreed to make.

(c) A payment or advance made by a member which gives rise to an obligation of a limited liability company under subsection (a) or (b) constitutes a loan to the company upon which interest accrues from the date of the payment or advance.

(d) A member is not entitled to remuneration for services performed for a limited liability company, except for reasonable compensation for services rendered in winding up the business of the company.

Comment

The presence of a liability shield will ordinarily prevent a member or manager from incurring personal liability on behalf of the company in the ordinary course of the company's business. Where a member of a member-managed or a manager of a manager-managed company incurs such liabilities, Section 403(a) provides that the company must indemnify the member or manager where that person acted in the ordinary course of the company's business or the preservation of its property. A member or manager is therefore entitled to indemnification only if the act was within the member or manager's actual authority. A member or manager is therefore not entitled to indemnification for conduct that violates the duty of care set forth in Section 409(c) or for tortious conduct against a third party. Since members of a manager-managed company do not possess the apparent authority to bind the company, it would be more unusual for such a member to incur a liability for indemnification in the ordinary course of the company's business.