Fiduciary duty includes a duty of loyalty, good faith, full disclosure, and reasonable care. It means that the fiduciary should not usurp business opportunities that belong to the company. The fiduciary must disclose any conflict of interest and cannot self-deal or compete with the company. The fiduciary must also exercise reasonable care and prudence.
Not every co-owner owes fiduciary duties. The extent of the duties depends on the entity type, the operating documents (such as operating agreement, partnership agreement, bylaws) and the default rules of the governing law. The default rules vary state by state and may have exceptions, but typically, the following may apply.
- In a partnership, partners may owe fiduciary duties to each other, depending on the partnership agreement.
- In a limited liability company, the members owe fiduciary duties, but it depends on whether the LLC is member-managed or manager-managed.
- In a corporation, the corporate officers and directors usually owe fiduciary duties to the company and the shareholders. Shareholders typically do not owe fiduciary duties to each other or to the company.
Since the duties may vary depending on the operating documents and the state law, please consult with an attorney to understand the scope of fiduciary duties.