In Lafayette and across Louisiana, those who are trying to start a business will have many business entities to choose from. One of the more popular structures is a Limited Liability Company (LLC). With an LLC, the members’ personal assets are generally shielded if there are issues with the business and there is a lawsuit or it must file for bankruptcy. That means that the person’s home, savings, automobiles and more are not subject to seizure.
Also, there are no corporate taxes as any profit or loss goes straight to personal income. The LLC members are self-employed and must pay taxes based on that. If a business is one in which people are taking a chance and do not want to place their personal assets in jeopardy, then an LLC might be the preferable option. There are other factors that should be considered with an LLC. That includes members meeting the fiduciary duties.
Understanding an LLC member’s fiduciary duties
The law clearly states what the fiduciary duties are based on being a member of an LLC. For people who might be confused by the technical nature of the terms and the responsibilities, there are some basics to be aware of and it is not all that complex. When part of an LLC, the decisions must be made based on benefiting the business. As the terms imply, the person who is responsible for these factors is the fiduciary and the fiduciary is responsible for the beneficiary.
When making decisions, it is required that the fiduciary adhere to the duty of care. That includes deciding how best to help the beneficiary and making decisions accordingly. Due diligence is necessary to make informed decisions and that includes accruing and assessing information. There is also a duty of loyalty. The fiduciary must put aside his or her interests and focus on the beneficiary. If there is an issue about which the fiduciary believes there is a conflict of interest, then it must be disclosed beforehand. The duties must be completed in good faith. Again, this focuses on the beneficiary’s interests and not the interests of the fiduciary.
Litigation may be necessary if there is a breach of fiduciary duty
These rules are imperative for an effective LLC. For members of an LLC who believe that there has been a violation of the fiduciary duty, it could be costly in myriad ways. Civil litigation or negotiation could be needed. Not only could it make the business vulnerable, but it can damage or outright destroy it. Commercial litigation can be complicated especially when the issue is inside the LLC itself. For this or any other issue related to business dealings, it is useful to have experienced assistance to address the issues and find a solution.
