Eliminating Fiduciary Duty Uncertainty: The Benefits of Effectively Modifying Fiduciary Duties in Delaware LLC Agreements
Unincorporated business entities, and in particular limited liability companies, are fast becoming a preferred form of business entity for structuring businesses and transactions. Such legal entities serve a wide range of functions. As with corporations, Delaware is often the jurisdiction of choice for forming unincorporated entities. Delaware limited liability companies are creatures of contract; they afford the parties involved the maximum amount of freedom of contract, private ordering and flexibility. To that end, the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101, et seq. (the LLC Act), makes certain statutory rules applicable only by default (i.e., only in situations in which members of a Delaware limited liability company (an LLC) have not otherwise provided in their limited liability company agreement (an LLC agreement)). As a result, members of an LLC are free to contract among themselves concerning a myriad of issues, including the management and standards governing the internal affairs of an LLC. Members of an LLC may also choose to govern their relationships exclusively by contract, without regard to corporate-style fiduciary duties of loyalty and care.