Good question. I don't know. This is where it gets into the territory that a lawyer would need to find the precedent and find scenarios where courts did indeed

Good question. I don't know. This is where it gets into the territory that a lawyer would need to find the precedent and find scenarios where courts did indeed find that an indemnity agreement was invalid for some reason. That goes beyond my knowledge of finance/economics and basic working knowledge of the law. My gut tells me that you are right about your scenario. IANAL, but if I were to hazard a guess, I'd say that the courts would be unimpressed with a corporate entity that has no assets and loads of indemnity agreements. (I'd also point out that a LLC being paid for anything by definition has assets, although it may just convert them all into expenses.) A court might decide that such an agreement is unenforceable. I'm guessing that blatantly bad faith arrangements like that would not stand up in court. But, again, this is a total guess.