Chapter 5: Fiduciary Duties in the Context of the Limited Liability Company

Litigating Fiduciary Duty Claims
Bankruptcy & Creditors’ Rights

Litigating Fiduciary Duty Claims is a practical guide for lawyers who are either beginning a fiduciary litigation practice or handling a fiduciary duty case in an unfamiliar area.

Chapter 5
I. Introduction
The ubiquity of the limited liability company as an entity form throughout the United States in the last several decades has often been described as a “much heralded development in corporate law.”  This entity form, first made available in the state of Wyoming in 1977, offered the benefit of a limitation on personal liability (much like a corporation) for its “members,” while enabling its members to treat the income generated from their interest as a pass-through for taxation purposes (much like a partnership). The limited liability company (LLC) statutes adopted throughout the United States thus created a hybrid entity that offers flexibility for the members and other participants in the entity to customize their relationships by contract. The LLC statutes established entities that “are creatures of contract, ‘designed to afford the maximum amount of freedom of contract, private ordering and flexibility to the parties involved.’”  All 50 states and the District of Columbia have enacted LLC legislation.

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Published with permission from the American Bar Association.