Resource Center

At common law, an individual shareholder of a corporation did not have a private cause of action against the corporation or its directors/officers. The theory was that the duty of officers and directors was one that was owed to all of the shareholders as a class. That same principle will apply to the LLC unless the operating agreement provides otherwise. Therefore, where the manager’s conduct harms a member, the company legally suffers the harm. As a result, the member must file a derivative suit unless your operating agreement creates an independent cause in each member. The decision as to whether to create a private right of action, like the one that exists for partnerships, is a good idea in the LLC context.

To learn more about the questions you should be asking and to access the article, please fill out the form below.