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Conflict of Interest?

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adktech

Junior Member
What is the name of your state? California

I am a 32% owner of a four owner company (two other partners are 32% and 1 partner is 4%). The company is an California LLC. We have been in business for 8 months, and we are now going to dissolve. Currently, we are closing out a settlement agreement. We had no employees except ourselves. We all stopped working for the company on a day to day basis. The only activity we have is collaorating with the attorney.

The company is an IT company, and I did all the work for the company since the other tech owner of the company stopped (quit) working four months ago.

We wanted to close out all books, so I quit working. However, I have run another business (for 11 years) which is the same type of business - IT repair and consulting.

Is it a conflict of interest for me to continue my business that I never closed down in the first place?
 


Brian Belamy

Junior Member
The answer depends on the LLC's operating agreement. Many operating agreements state the following:

A member has a duty of loyalty to refrain from dealing with the LLC in the conduct or winding up of the LLC business as or on behalf of a party having an interest adverse to the LLC without the consent of the other Members; and except as otherwise provided in this Agreement, to refrain from competing with the LLC in the conduct of LLC business before the LLC's dissolution without the other Members' consent.

Assuming your LLC has the above language in its operating agreement regarding the duty of loyalty one member owes to the other memmbers, the answer to your question depends largely on the facts. The most relevant facts to resolving your issue are probably (1) Whether the other members consented to you conducting your other IT business; and (2) Whether your other IT business did or is capable of taking business opportunity from the dissolving LLC.
 

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