Here's a curveball: As a member of an LLC, you've pledged more than just your initial capital investment. You've essentially signed up for what's known as a 'duty of loyalty.'
Sound unfamiliar? You're probably not the only one.
In my day-to-day, I often see this lesser-known obligation missing from LLC agreements I review. It's something that sneaks around in the background when everything is all smooth sailing within the LLC. But when the waters get choppy, when disagreements sprout, 'duty of loyalty' rises to the surface. Suddenly, it's the star of the show in disputes - being tossed around from one party to another.
So, what exactly is this elusive 'duty of loyalty'?
Well, without turning this post into a long-winded law class, let's just say it's an obligation that requires members to act in the best interest of the LLC. It's not about putting your interests first, but the LLC's. That means, profit-sharing should be fair, no secret dealings in the same line of business, and full transparency is expected.
It all sounds pretty serious, doesn't it?
And that's because it is. Understanding this concept can be vital for your business. After all, no one wants to be caught off guard when disagreements arise.
LLC Members, it's time to get a grip on this 'duty of loyalty.' Your future self might just thank you for it.