• Home
  • About First Venture Legal
  • Areas of Practice
  • Blog
  • Contact Us

First Venture Legal

Get a free consult

Fiduciary Duties in a LLC

January 8, 2016 by James Johnson Leave a Comment

Tweet

Entrepreneurs who are organized in a limited liability company may not realize they have fiduciary duties to the company and to their fellow members. When we talk about fiduciary duties in a LLC, we typically mean the duties of care and loyalty — that is, to work in the best interest of the company and its members, and not for one’s own self-interest to the detriment of the company and its members. The issue of fiduciary duties in a LLC usually come up in the context of a member with a controlling interest using that control to benefit himself or herself at the expense of the LLC or fellow members, or the context of a member starting a venture that competes with the LLC.

Different states impose fiduciary duties upon actors in a LLC in different circumstances, although the general rule provides that managers of a manager-managed LLC, and members of a member-managed LLC owe fiduciary duties to the LLC and its members, while non-managing members of a manager-managed LLC do not owe such duties. However, it is unclear whether, in a nominally member-managed LLC that is in practice or by operating agreement managed by fewer than all of the members (such that the LLC effectively has “silent partners”), “non-managing” members are subjected to fiduciary duties. Finally, regardless of how the LLC is managed, some states also impose fiduciary duties upon a member that has a controlling membership interest (such as a majority of the equity or voting interest, depending on how the operating agreement, if any, is written).

Entity Structures and Formation, General Legal Issues

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

(617) 600-6132

Site Disclaimer

None of the information presented on this site is intended or inferred to be or to be used as legal advice or as a substitute for legal advice, or is intended or inferred to create an attorney-client relationship. If you require legal advice or the services of an attorney, please contact First Venture Legal or another attorney for that specific purpose.

First Venture Legal and its attorneys claim no special training or expertise in any particular area of law. By accessing this site or its contents, either directly or through a third party, you acknowledge that you understand and accept the terms of this disclaimer. Thank you.

Copyright © 2021 · First Venture Legal · PO Box 410121 Cambridge , MA 02141 · Powered by ThriveHive