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What constitutes a breach of fiduciary duty in a partnership?

On Behalf of | Jan 24, 2025 | BUSINESS & COMMERCIAL LAW - Business & Commercial Law

When you enter a business partnership in Florida, you take on specific legal duties. This creates what’s known as a “fiduciary relationship,” which means you must act in the best interests of both the partnership and your partners. These legal responsibilities are serious, and understanding them – along with the consequences of breaking them – is essential for every business partner.

Understanding fiduciary duties

Under Florida law, partners owe two primary fiduciary duties to each other:

  • Duty of loyalty: Partners must always put the partnership’s interests ahead of their own. Florida law expects partners to protect partnership property as if they were trustees. This means you cannot use partnership resources for your own benefit or compete with your partnership’s business.
  • Duty of care: Partners must exercise reasonable care in managing partnership affairs. This means avoiding reckless decisions, intentional misconduct or violations of the law. While partners don’t need to be perfect, they must act with the level of care that a reasonable person would use in similar circumstances.

Breaking one’s fiduciary duties as a partner can lead to serious consequences. Other partners can take legal action to recover the money they lost, and in the worst cases, they might have grounds to end the partnership completely.

Actions that may be a breach of fiduciary duty

Here are common actions that might qualify as a breach of fiduciary duty:

  • Misappropriating partnership funds or assets for personal use
  • Failing to disclose important business information to other partners
  • Taking partnership opportunities for personal gain
  • Engaging in business activities that compete with the partnership
  • Making unauthorized significant business decisions
  • Sharing confidential partnership information with outsiders
  • Conducting business transactions that create a conflict of interest

These actions can significantly impact the partnership’s success and stability. However, it’s important to note that not every mistake or disagreement rises to the level of a fiduciary breach. The key factor is whether the partner’s actions demonstrate a failure to act in the partnership’s best interests or show a pattern of self-dealing behavior. If you believe a partner has violated these duties, it’s crucial to seek the advice of a lawyer.

Get clarity on the situation

Protecting your business interests often starts with understanding your rights – but it shouldn’t end there. If you believe your business partner failed to meet their fiduciary duty, consider consulting with an attorney to explore your options.

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