Breach Of Fiduciary Duty – Partnership Disputes

When two or more people decide to enter into a business partnership, their success often relies upon the trust between the partners to do what is best for the business. The actions of one partner can have a significantly adverse effect on the other partners and the business as a whole. For this reason, the law requires that many partners owe a fiduciary duty to the partnership. Whether you have a general or limited partnership, any partners participating in the management of the business will be expected to abide by a fiduciary duty. Generally speaking, limited partners do not owe such a duty to the partnership, however, they might if they also participate in the operations or direction of the company.

If any managing partner breaches their fiduciary duty, the rest of the partners may face financial loss, legal liability, or other harm. There are many different duties under the umbrella of “fiduciary duty,” and the following are brief explanations of the different expectations of partners under the law.

Duty of Good Faith and Fair Dealing

The overarching expectation for all managing partners is to act in good faith for the best interests of the partnership and to be honest and fair to all other partners. This duty exists from formation to dissolution, including during all daily operations of the partnership.

Duty of Care

While managing the partnership, partners are expected to use reasonable care when making business decisions. If a partner fails to make a reasonably prudent decision and does not use due care, they could face legal action for negligent management.

Duty of Loyalty

Fiduciary duty requires that a partner hold the interests and success of the partnership as a whole in higher regard than their personal interests. Breach of the duty of loyalty can include self-dealing business transactions or engaging in a conflict of interest with the partnership.

Duty of Disclosure

Partners are expected to be open and honest regarding the state of the partnership and potential opportunities or risks. Candor and full disclosure should be used regarding assets, activities, conflicts of interest, contracts, debts, daily operations, opportunities, and more.

A breach of any of the above duties can cause significant harm to a partnership and often causes a potentially serious dispute between the partners.

Schedule a Free Consultation with a Maryland Partnership Dispute Attorney Today

Breaches of fiduciary duty in a partnership can occur in many different ways and can cause significant harm to the other partners and the business as a whole. If you believe that one or more partners has engaged in questionable behavior that constitutes a breach of duty, you should not delay in calling an experienced partnership attorney to discuss a potential case. Attorney Ari Casper has helped many partnerships resolve disputes regarding fiduciary duties and many other legal issues, so please call The Casper Firm today at 410-989-5097 for a free initial consultation.