If a former LLC member withdraws and later competes, can they be liable when the operating agreement contains no non-compete clause?

• A. Yes; restraint of trade applies by default
• B. Only if the former member misrepresented their intentions
• C. Generally no; fiduciary duties end upon withdrawal unless a continuing duty is shown
• D. Only if the LLC suffer harm directly caused by the competition

Answer: (C)

When a member leaves an LLC, the fiduciary duties they owed—loyalty and good faith—generally end with their membership. If there’s no non-compete clause, there’s no contractual restraint preventing the former member from competing in the LLC’s market. Liability for post‑withdrawal conduct only arises if there’s a continuing duty shown—such as an obligation to protect confidential information or a post‑termination covenant in the operating agreement—or if the former member misuses trade secrets or breaches a specific duty tied to the LLC. Absent those circumstances, simply competing after withdrawal does not breach fiduciary duties. The other choices aren’t correct because restraint of trade isn’t imposed by default, misrepresentation isn’t the standard basis for liability here, and liability isn’t dependent on the LLC’s direct harm from the competition in the absence of a continuing duty or misuse of confidential information.