BUS607 Week 1 Discussion 1 LLC and Fiduciary Duty

Outline the fiduciary duties that the members of an LLC owe to each other.

This case outlines the fiduciary duties that the members of the LLC owe to each other.  The fiduciary duties that members of an LLC have to each other are fiduciary duties and duties of care. A duty of care prevents members from inadvertently breaking the law or knowingly doing something they know is illegal or wrong. A duty of loyalty requires each affiliate to have a partnership account for any property, interest, or interest received by the affiliate as part of the operation of the partnership. In addition, partners must refrain from competing with or engaging with the other party of the partnership (Miller, 2014). 

Can the terms of  NewGroup, LLC’s operating agreement change these fiduciary responsibilities? Please explain why or why.

For Green to win the case, he must prove, beyond any reasonable doubt, that Jones violated his duty to act in good faith. However, if an Operating Agreement is entered into, “Member shall not be liable to the LLC or any other member for the business or activities of the LLC or any other member, even if the business competes with the business of the LLC.” shall be” (Müller, 2014).  It may also be restricted by a written Company Agreement. Contracts allow partners to specify in the contract actions they agree to breach fiduciary duty (Miller, 2014).   In this case, Jones found that Green had breached its fiduciary duty and that Green had breached its fiduciary duty. Therefore, it depends on the state in which the LLC operates to make a determination in this case. Some states allow for modification of the operating contract, but in most state courts the operating contract is governed by a document agreed upon by the partners (Müller, 2014).

In the above scenario, who should the court rule in favor of? Why?

To the best of my knowledge, the NewGroup LLC Operating Agreement takes precedence in this case. Fiduciary Duty Under Georgia LLC Code (Müller, 2014). Green Property is therefore entitled to enter into further parcel development agreements within the same area. This is based on the closing  of NewGroup LLC’s operating agreement, which states that the “Company competes with that  LLC.” Jones Group Inc. entered into this agreement immediately because both companies knew in advance that they could compete directly with NewGroup LLC (Müller, 2014). Additionally, there was no precedent in Georgia law or operating agreements to prohibit members from working with other companies. We expect the judge to rule in favor of Green Properties Group, pursuant to the Operating Agreement signed at the time of the formation of NewGroup LLC.

References

Miller, R. L. (2014).Business law: Text and cases - commercial law for accountants. Retrieved from https://www..redshelf.comLinks to an external site.