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© 2009-2019 Dana H. Shultz, Attorney at Law

Do LLC Officers Have a Fiduciary Duty?

Picture of a meerkat on duty, symbolizing whether LLC officers have fiduciary duties

Officers of a corporation have a fiduciary duty to both the corporation and its shareholders. (See California Officers Need to Be More Careful than Directors.) I recently had to consider, for a limited liability company in California, whether LLC officers have a similar duty.

Section references below have been updated to reflect California’s new LLC law that took effect on January 1, 2014 (see RULLCA Brings New LLC Laws to California in 2014).

I was preparing the operating agreement for a client’s LLC. The client was to be the sole member (equity owner) and manager. (more…)

What is a Board of Directors?

Quora logo

This post is based on a Quora question that I answered: Q. What is the board of directors? What are the functions of the board of directors? What is the function of each member of the board?

A. The board of directors, which is subject to shareholder election and removal, generally is responsible for managing the corporation’s business and affairs.

Specific responsibilities typically undertaken by a board (particularly in a mature company) include, but are not necessarily limited to, the following: (more…)

What are “Best Efforts”?

Picture of a reservoir, symbolizing a case about a contractual obligation to use "best efforts"

Contracts sometimes require that a party use its “best efforts” to carry out its obligations. (This is in contrast to, for example, “commercially reasonable efforts”.) Last month, in California Pines Property Owners Assn. v. Pedotti, the California Court of Appeal for the Third District provided a definition of “best efforts”. (more…)

Can I compete with my own LLC?

I recently had a Q-and-A dialogue on Avvo with an LLC member-manager who had a falling out with the other (50%) member and wanted to know whether he could form a separate business that would compete with the existing LLC. An edited version of our exchange appears below.

Q. I have an LLC with a partner. We each own 50% of the business (its an e-commerce store) and we’re member-managers. I’d like to buy him out, but his price is higher than I’m willing to pay. I have been pondering starting another e-commerce store selling kind of the same thing. Question is a) Would an e-commerce business out there competing for new customers constitute a breach of fiduciary duty? b) Would it be possible to rescind title as manager in the LLC which would eliminate that non compete fiduciary duty of a manager?

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