The relationship between owners of a closely held business is not purely contractual in most states. Controlling owners, and often all owners, owe fiduciary duties to one another — commonly described as duties of loyalty and care, and in some jurisdictions a duty of utmost good faith comparable to that between partners.

Loyalty prohibits self-dealing, taking a company opportunity for oneself, competing with the company, and using company assets or information for personal benefit. Where a transaction is with an interested party, the burden typically shifts: the interested owner must show the transaction was entirely fair rather than the challenger showing it was not.

Care requires informed decision-making, and is generally protected by the business judgment rule.

Good faith in this context reaches conduct that is technically permitted but designed to disadvantage a co-owner — the pattern that shareholder oppression doctrine addresses.

Two practical qualifications. Duties can be modified by agreement in many states, though the duty of good faith usually cannot be eliminated entirely. And the duties run in the context of the parties’ actual arrangement — an owner who was never involved in management has different reasonable expectations from one who built the business alongside the majority.