Recently, the Arizona Court of Appeals said no, that members of a LLC do not owe other members common law fiduciary duties. The duties owed or not owed by members are determined by the operating agreement entered into by the members. Some have argued that due to the nature of a closely held LLC, the fiduciary duties owed by a director to the shareholders of a corporation apply to the managers or managing members of a LLC. Unlike Arizona’s corporate laws, Arizona’s LLC laws are silent on imposing any express fiduciary duties by the members of an LLC.
When forming a LLC, care should be taken to form a comprehensive written operating agreement to govern such things as the duties and responsibilities owed by the members or managers, how profits and losses are to be shared and an exit strategy including “buy sell” provisions among others. If you have an LLC or thinking of forming one, please contact Buntrock Law so we can help you create an operating agreement that protects you and your business.