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You may be familiar with fiduciary duties owed in a corporation. You may have heard
of a duty of loyalty, or perhaps a duty of care. Those duties cannot be waived and the
question is: Who owes those duties? The short answer is: The controllers owe those duties.
The controlling people can be controlling stockholders who own a majority of stock,
or it could be the directors, or it could be the officers; they all owe those fiduciary
duties. And sometimes those can result in liability when they get sued. Whereas in an
LLC, again, the controlling members owe fiduciary duties, which could be the officers of the
LLC, or the majority managing members of the LLC; the ones who control the membership of
the LLC. The difference in an LLC is that through contract, you're allowed to waive
those fiduciary duties of loyalty and good faith. The only duty that survives in an LLC
if you waive those is the applied covenant of good faith and fair dealing. So one reason
people form LLCs is because they want to be able to operate their LLC the way they want
to without the risk or threat of being sued for breaches of certain fiduciary duties.
Whereas, in a corporation it's a very ridged structure and those cannot be waived no matter
what's agreed upon, in an LLC, that operating agreement can be set up in such a way to waive
certain fiduciary duties to help protect you from lawsuits. Thank you.