Limited liability companies have the benefit of being structured as manager-managed LLCs or member-managed LLCs. Regardless of who is tasked with managing your company, there are responsibilities expected of the managers in charge. The Florida Revised LLC Act stipulates that managers of a manager-managed LLC and members of a member-managed LLC have a fiduciary duty of loyalty to the LLC and its corresponding membership. This obviously is less important for a Single Member LLC. The fiduciary duty of loyalty imposes certain responsibilities on manager or member, respectively.
Responsibilities of Managers and Members in LLCs
The key duties of managers in a manager-managed LLC or members of a member-managed LLC related to the fiduciary duty of loyalty are the following:
- Accounting to the LLC and hosting as trustee, the LLC’s property, profit, or benefit derived from the manager or member in 1) the conduct or winding up of the LLC’s affairs, 2) the use of the LLC’s property, or 3) the appropriation of a business opportunity for the LLC.
- Refraining from dealing with the LLC as a person with an adverse interest to the LLC.
- Refraining from competing with the LLC.
- Managers and members are expected to perform the above duties of loyalty consistent with their obligations to good faith and fair dealing.
Limits to Manager or Member Fiduciary Duty
The Florida Revised LLC Act also details that certain limits exist to the stated fiduciary duty of loyalty, which include the following:
- A manager or member is not in violation of their duty simply because their conduct furthers an interest of their own.
- A manager or member is allowed to rely on information, reports, statements, or opinions prepared for them by 1) employees or members of the LLC that are believed to be competent and reliable, 2) legal counsel, CPAs, or other professionals acting in their professional area of expertise, and 3) an appointed committee of which the manager or member is not a participating committee member and the committee instills a reasonable degree of confidence.
In addition to the fiduciary duty of loyalty, managers or members are expected to owe a fiduciary duty of care to the limited liability company and its members. This duty of care typically refers to refraining from any reckless or negligent conduct, willful misconduct, or knowingly committing any violations of the law. Managers and members must also conduct their fiduciary duties with an obligation toward good faith and fair dealing. Additionally, managers and members should consider long-term interests of the LLC, including economic, social, legal, and more. Managers and members should also consider the impact of company actions on the LLC employees, customers, and community at large.
Your LLC operating agreement and other common law principles supplement a manager or member’s fiduciary responsibilities. The Florida Revised LLC Act gives emphasis to the enforceability of an operating agreement, as well as common law principles that relate to fiduciary duties, as supplements to the act.
Fiduciary Duties of LLCs: Final Thoughts
With the Florida Revised LLC Act, it is important to designate at formation whether your LLC is to be manager-managed or member-managed. The fiduciary responsibilities that guide both manager and member will be determined by this designation. Similarly, any limitations on those duties will derive from this designation, as well. It is smart practice to have an experienced attorney review your LLC management designation, as well as your company’s operating agreement, to ensure that managers and members are in compliance with the act and you don't forsake any benefits.