Mr. LLC has standards set by law and your operating agreement.
Standard of Care
The law says that Mr. LLC’s members and managers must perform their duties in good faith, in Mr. LLC’s best interests, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Here are a few guidelines to help you meet this standard:
- If you don’t know the answer, look to your advisors and other professionals for help.
- If you don’t have the skills to accomplish something, hire someone who has the skills, or learn them on your own.
- If you know something that makes reliance on the professional’s advice unwarranted, then don’t rely on the advice.
- If you start to rationalize your behavior, or don’t have an honest belief that something is in the company’s best interest, then don’t do it.
- If you have doubts about an action, talk with the other members and get their consent to take a certain course of action.
You are part of a team and must be loyal to it. Here are some team rules:
- You can’t be on two competing teams. You must pick one or the other. You can’t compete against Mr. LLC.
- You must protect the game plan. Mr. LLC’s information and documents help it succeed. You must keep them confidential.
- You must do things in the best interests of the team. If you’re caught in the middle of a tug-of-war between your personal interests and Mr. LLC’s interests, then you have a conflict. You’ll either have to withdraw from the matter or get the consent of the other members to participate.
- You must use the team’s property to benefit the team and not yourself. Don’t use Mr. LLC’s assets for personal use. Don’t enter into transactions such as loans and guarantees with the LLC without the consent of the other members as required in the operating agreement.
- You must not take advantage of your status as a team member to the disadvantage of the team.
Overall, you must be up front and honest with the other members. You must disclose information that the other members need to know with respect to Mr. LLC’s business and internal affairs. You must disclose things to the other members and let them decide what you can do.
Good Faith and Fair Dealing
Every contract, including your operating agreement, includes an implied duty of good faith and fair dealing. This means that you will not thwart the duties, policies, rights, and privileges established in your LLC’s operating agreement or bend its rules. You’ll do your best to live up to the expectations established in the operating agreement.