Avoiding conflicts of interest
As a LLC member you will be required to place the interest of the LLC ahead of your personal interest. In order to avoid conflicts of interest you are not allowed to compete directly with an LLC that you are a member of, you can’t make secret deals with the LLC that will bring your personal gains or in any other way secretly profit from LLC activities. This is why being a member in multiple LLCs can make things more complicated, especially if you are put in the situation of having to protect, promote or represent the interests of one LLCs which is competing or carrying commercial activities with another LLC in which you are a member.
Let’s say for example that the same individual owns a bakery and a flour factory and he or she wants to give the contract for supplying flour to the bakery, to the factory where he or she is an owner. This would be a conflict of interest since he or she would personally benefit from the contract as owner of the flour factory, while possible violating his or her duties toward the bakery. Some states allow this type of conflict to be solved by disclosing the conflict to the other members of the potentially effected LLC and making them part of the decision to give the contract or not in such as situation.
The main rule in such situations is to disclose any matter that you consider to be a potential conflict of interest and to document the decisions made on the matter. Make sure also that you know and understand the requirements defined by law states and operating agreements on the subject. State law on members duties towards an LLC differ from state to state. There are states where in a manager-managed LLC, members owe a duty if they act as managers, and states who allow members to change or eliminate duties through the LLC’s operating agreement.