Starting a company with a trusted business partner can be a rewarding endeavor. You and your business associate will likely consider several rules that determine the best way to operate the business and its interactions with consumers. However, if it turns out that your business partner does not have the best interests of the business in mind, this could lead to several issues. If your business partner’s reckless actions are hurting your business, you should consult with an experienced Baltimore fiduciary responsibilities attorney today.
The Heyman Law Firm understands the frustration of working with a business partner that neglects their obligations to the company and we can help you hold them accountable for their actions. Our firm has represented business owners in Baltimore and across Maryland, and we would be honored to provide you and your business with the legal representation that you deserve. To schedule a confidential consultation to discuss your case, call the Heyman Law Firm at (410) 305-9287.
Partnership Fiduciary Duties
A fiduciary duty is an obligation to further the best interests of a business that you are responsible for. This means that a partner that helped to establish the partnership will have the highest burden for ensuring the company performs well. It is also important to note that fiduciary duties may shift depending on the type of partnership that you and your business partner are operating.
Generally, there are three types of fiduciary duties that a business partner is expected to uphold.
Fiduciary Duty of Loyalty
The fiduciary duty of loyalty states that a governing partner must place the success of the partnership well above the personal and business interests they possess. For example, if a partner is engaged in other business activities, those interests must not interfere with their duty to the partnership.
Fiduciary duties of loyalty also require a partner to properly manage all property owned by the business for the benefit of both partners. If a partner were to use company property to further their own interests, this would be a breach of their duty (unless, under certain circumstances, permitted by the partnership agreement or other partners). This duty also prohibits a partner from engaging in business endeavors that will result in competition with the partnership.
Fiduciary Duty of Care
To satisfy the fiduciary duty of care, a partner must act in a reasonably prudent manner when performing transactions on behalf of the business or when managing business affairs. For example, if a partner fails to keep an accurate accounting of company income and expenses, this would violate the duty of care.
When discussing the fiduciary duty of care, it is important to also discuss the business judgment rule. The business judgment rule states that a partner may not be held liable for business decisions that were well-informed and carried out in good faith. This permits a business partner to make business decisions for the partnership without concern of being held liable for every transaction that does not go as planned. However, business decisions that were not properly researched will not be covered by the business judgment rule.
Fiduciary Duty of Disclosure
The fiduciary duty of disclosure requires partners to be candid with information about potential business decisions. To operate efficiently, a partnership needs to have partners that constantly communicate about every aspect of the partnership’s activities.
The duty of full disclosure is especially important when a partner is considering acquiring or selling property on behalf of the partnership. Disclosure is also important when a partner has a conflicting interest against the partnership that could interfere with their duties.
As mentioned, these fiduciary duties typically do not apply to non-managing partners of the business. Under certain circumstances, it may be possible to alter the fiduciary duties that a partner must comply with.
Suing for Breach of Fiduciary Duties
Before you file a lawsuit for breach of fiduciary duties, you should understand what type of lawsuit you may need to file. The type of breach committed by a partner will correlate to the type of case a plaintiff should file. While fact specific, the Maryland courts have generally held that there is no independent cause of action for breach of fiduciary duty. Therefore, knowledgeable counsel is needed to help you determine how to plead your claim to obtain relief from a partner who breached their duties.
Our Maryland Business Partnership Lawyers are Ready to Work with You
If your business partner violated his or her fiduciary duties, you should contact an experienced Maryland business partnership lawyer today. The legal team at the Heyman Law Firm possess several years of business law experience, and we are dedicated to using that experience to help you litigate your claim. To schedule a confidential legal consultation, call the Heyman Law Firm at (410) 305-9287, or contact us online.