Moonlighting: Legal for Business Owners?

By Nina Kaufman, Esq.

Q: If a person is a 50 percent owner in an LLC corporation, is it illegal for that person who owns another company that does the same type of work to go and do work or operate under that business?  Someone mentioned to me that it is a conflict under a law regarding corporate obligation.

A: Your question is a good one, and the answer is not black-and-white.

Generally, unless you have a provision in your operating agreement (or in your state’s law) that prohibits someone from working in two potentially competing companies at once, it’s not outright illegal for someone to do so. However, it certainly raises questions of loyalty.  After all, if you’re involved in one or more companies and a potential client comes in, through which company do you service the client?

State laws do vary, so I’d recommend that you speak to a local attorney to get a definitive answer to your question.  You can find attorneys through your local bar association–look for ones that focus on corporate and LLC law.

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