I. Loyalty and Care: What Does the Law Require?
When someone takes on the job of running an LLC, the law requires them to do right by all others involved. Conventionally, restrictions are applied through common law, state statute, or are embedded in a company’s operating agreement.1 To ensure protection of LLC members and businesses themselves, Pennsylvania has codified standards of conduct directly within its LLC statute.2 Who exactly owes these duties varies based on the company’s management structure, as LLCs may either be member-managed or manager-managed.3 In member-managed LLCs, each member owes the company and the other members a set of duties.4 On the other hand, manager-managed LLCs only require managers to act in accordance with the statutory standards of conduct, while members are not bound to do so based solely on their status.5
Pennsylvania imposes a duty of loyalty, a duty of care, and an obligation to act in good faith and fair dealing on those in charge of LLCs.6 The duties of loyalty and care are widely considered the primary fiduciary duties in LLC law.
Duty of Loyalty
The duty of loyalty is generally premised upon prioritizing the success of the company over that of any individual.7 It specifically instructs a member or manager how to behave in situations that they face regularly within the scope of their role. In accordance with PA statute, the duty of loyalty requires that any property, profit, or benefit stemming from company activities or assets is accounted to the company and held and protected on its behalf. Additionally, the duty prohibits
1 Sarah Barton, The Who, What, and When of Fiduciary Duties in Limited Liability Companies, WEALTHCOUNSEL(Dec. 26, 2025, at 09:00 ET),
https://info.wealthcounsel.com/blog/the-who-what-and-when-of-fiduciary-duties-in-limited-liability-companies.
2 15 Pa.C.S. § 8849.
3 15 Pa. C.S. § 8847.
4 15 Pa.C.S. § 8849.1(a).
5 15 Pa.C.S. § 8849.2(a); 15 Pa.C.S. § 8849.1(i).
6 15 Pa.C.S. §§ 8849.1, 8849.2.
7 15 Pa.C.S. §§ 8849.1(b), 8849.2(b).
a member or manager from competing against the company or acting adversely to the company’s interests. Sometimes a fiduciary personally benefits from a transaction, in which case courts analyze whether the deal was entirely fair to other owners of the LLC.8
Duty of Care
The duty of care is relatively self-explanatory; it is in place to ensure that fiduciaries are conduct themselves in a way that does not harm the company. Pennsylvania law instructs those who owe the duty to avoid acting negligently, recklessly, or just flat out unlawfully.9 The contractual obligation of good faith and fair dealing is almost intertwined within the duty of care, although PA statute lists them under separate subsections.10 Subsection (d) of the statute for each style of management requires that those whom duties are imposed on must act fairly and honestly in accord with the terms of any contractual agreement.11 The main distinction between this obligation and the primary fiduciary duties is the absence of any altruistic element.
The duties themselves are not absolute, but they cannot be eliminated completely. For example, managers or members may enter transactions that would otherwise breach the duty of loyalty if the transaction is approved or ratified by a group of disinterested members.12 Additionally, operating agreements may be used to limit liability rising from a breach in the duty of care, but cannot use its terms to completely eradicate it.13
II. What a Breach Looks Like
The most common breaches fall into the categories provided under the Pennsylvania’s duty of loyalty statutes.14 A few examples include: a fiduciary causing the LLC to conduct business with a company that manager separately controls (self-dealing), a fiduciary personally taking business from an opportunity that belonged to the company (usurpation of company opportunity), and improper competition with the company (misuse of company property and funds).15 Another typical breach is one called a “freeze-out,” in which majority members use their voting power to exclude minority members from decisions, ultimately preventing them from receiving the benefits they are entitled to as owners. The Pennsylvania Superior Court has repeatedly held that when a group of majority members vote without notifying minority members (freeze them
8 Wolf v. Fried, 373 A.2d 734, 736–37 (Pa. 1977).
9 15 Pa.C.S. §§ 8849.1(c), 8849.2(c).
10 §§ 8849.1(d), 8849.2(d).
11 Id.
12 §§ 8849.1(e), 8849.2(e).
13 §§ 8849.2(h), 8815(c)(12).
14 Meghan Day, Fiduciary Duty 101: Definitions, Breaches, and Prevention Tips, Diligent (Jan. 27, 2026),
https://www.diligent.com/resources/blog/fiduciary-duties-of-board-members; 15 Pa.C.S. § 8849.1(b); 15 Pa.C.S. § 8849.2(b).
15 Id.
out) and benefit from the result to the detriment of those minority owners, a fiduciary duty is breached.16 In Retina Assocs. of Greater Phila., Ltd, the Court declared that majority members who voted engaged in wrongful conduct, which fundamentally ties into the duty of care.17
Although the examples provided are found in most cases involving breaches of fiduciary duties, any sort of conduct that appears to violate a member or manager’s legally imposed duty can qualify if well-documented.
III. Remedies Available to Injured Members
Pennsylvania law provides two distinct procedural options for those pursing a claim for breach of fiduciary duties.18 A member may bring either a direct or derivative action, dependent on the type of harm suffered. Direct action is appropriate when the member can prove that the harm they suffered was not solely the result of an injury suffered by the company.19 If the injury extends to the company, it is proper to bring a derivative action.20
In instances where the breach is so severe that it is not reasonably practicable for the company to move forward, such as fraud, illegal activity, or oppressive conduct which directly harms the applicant, a member can request that the court dissolves the shuts the business down via judicial dissolution.21
Furthermore, breaching a fiduciary duty is considered a tort in Pennsylvania, which provides its own menu of remedies.22 One lane of recovery is through compensatory damages, which account for lost income or profits that could have been expected if the breach hadn’t occurred.23 Pennsylvania Courts also allow plaintiffs to collect punitive damages when a fiduciary duty has been breached.24 Punitive damages are not actual damages that have occurred as a result of the breach, but rather serve as preventative measures to dissuade similar action in the future. Available options include reduction of compensation earned during the period of breach, disgorgement, reformation, removal of the fiduciary, forfeiture, recission of the underlying transaction, and other injunctive relief.25 Because the duty of loyalty specifically requires a manager or member to account to the company and “hold as trustee” any property, profit, or benefit derived from company activities, a breach of that duty is particularly well suited to a
16 See Kessler v. Broder, 851 A.2d 944, 950 (Pa. Super. Ct. 2004); Retina Assocs. of Greater Phila., Ltd. v. Retinovitreous Assocs., Ltd., 176 A.3d 263 (Pa. Super. 2017).
17 Retina Assocs. of Greater Phila., Ltd., 176 A.3d at 281.
18 Pa.C.S. §§ 8881–8882.
19 § 8881(a)–(b).
20 § 8882.
21 § 8871(a)(4).
22 See B.G. Balmer & Co. v. Frank Crystal & Co., 148 A.3d 454, 470 (Pa. Super. Ct. 2016).
23 AM/PM Franchise Ass’n v. Atlantic Richfield Co., 526 Pa. 110, 584 A.2d 915, 920 (Pa. 1990).
24 Hutchison v. Luddy, 870 A.2d 766, 773 (Pa. 2005).
25 Kessler v. Broder, 851 A.2d 944 (Pa. Super. Ct. 2004); Fid. Fund, Inc. v. Di Santo, 500 A.2d 431, 440 (Pa. Super. Ct. 1985); Wiseman v. Martorano, 405 Pa. 369, 372 (Pa. 1961).
court-imposed constructive trust, which prevents the breaching party from being unjustly enriched.26
In many cases, the person who breached these duties will attempt to hide behind a separate LLC’s protections. Generally, members or managers are not personally liable for the LLC’s liabilities merely due to that status.27 This corporate veil can give way under certain circumstances, exposing a member to personally liability. An owner who controls or directs the LLC’s misconduct can be help personally liable if they have either: (1) used the company it attempts to shield itself with as a mere alter ego to commit fraud or act illegally, or (2) personally served as an active participant in committing wrongful conduct.28
The appropriate remedy ultimately depends on which duty was breached, the extent of the breach, and who was responsible for it.
26 15 Pa.C.S. § 8849.1(b)(1); Denny v. Cavalieri, 443 A.2d 333, 335 (Pa. Super. Ct. 1982); Robbins v. Kristofic, 643 A.2d 1079, 1083 (Pa. Super. Ct. 1994).
27 15 Pa.C.S. § 8834(a)
28 Sereda v. Ctr. City Acquisitions, LLC, 222 A.3d 1161, 1163 (Pa. Super. Ct. 2019); Mortimer v. McCool, 255 A.3d 261, 270 (Pa. 2021).
