Duty of Care

A duty of care is a legal obligation owed by an owner of a company to the other owners in that company as well as to the company itself. In Oregon, for example, members of a member-managed LLC owe a duty of care, as set forth by the Oregon Limited Liability Company Act as follows: “A member’s duty of care to a member-managed limited liability company and the other members in the conduct and winding up of the business of the limited liability company is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.” The duty is a fiduciary obligation. Members may modify the duty in their operating agreement, but the Oregon Limited Liability Company Act provides that such operating agreement may not unreasonably reduce such duty. Related to the duty of care are the duties of good faith and fair dealing and the duty of loyalty, both of which are also explained in the Oregon Limited Liability Company Act. Most operating agreements between members in an LLC explain the existence of such duties, and occasionally set forth refinements and modifications to such duties, to the extent permitted under Oregon law.