Legal Question in Business Law in California

Re: fiduciary duties, conflict of interest

You have raised interesting issues that are usually addressed in such things as shareholder agreements or LLC operating agreements among the members. Generally, an officer of a company has a fiduciary duty to the company, including an obligation regarding company business opportunities. However, where you had a known, pre-existing business which you were clearly not bringing into your company, such activity may, by implication, be excluded. The issue becomes cloudy, however, if your existing greeting card business grew to a point where it interfered with your on-line greeting business.

You should engage counsel (such as ourselves) to draft a shareholders' agreement spelling out what activities are, and are not, within the corporation, and what activities in which the shareholders may or may not engage in competition with the company. (Another idea is to incorporate your greeting card business into your new corporation, with perhaps the new shareholders adding capital to keep the interests equal).