Essentials of Fiduciary Duties
Trust is everything when you go into business with a partner. You rely on each other to make smart decisions, act in the company’s best interest and be upfront about any issues that arise. But what happens when that trust is broken?
At Tempus Fugit Law, we’ve seen how fiduciary duty and failing to uphold it can make or break a business partnership. Whether you’re starting a new venture or dealing with a potential breach, understanding these legal obligations can help you protect yourself and your business.
Our experienced attorneys are ready to help you navigate the complexities of fiduciary duties, as they pertain to business partnerships.
What Is Fiduciary Duty, and Why Does It Matter?
Fiduciary duty is a legal obligation between business partners that requires them to act in good faith and in the best interest of the business. This duty includes:
- Loyalty: No self-dealing, no secret profits and no competing with the business.
- Care: Making informed, responsible decisions and not engaging in reckless behavior.
- Good Faith & Fair Dealing: Acting honestly and fairly, even when things get tough.
In short, business partners have to be transparent, fair and accountable to each other. When one partner fails to do this, it can lead to serious financial and legal consequences.
What Does a Breach Look Like?
A fiduciary breach isn’t always obvious at first. It can happen in many ways, including:
- Self-dealing: A partner using company resources or opportunities for personal gain.
- Undisclosed conflicts of interest: Secret investments in competing businesses.
- Negligence: Careless decision-making that puts the company at risk.
- Withholding information: Keeping financial details or key business decisions from other partners.
If something doesn’t feel right in your partnership, it’s worth looking into. Catching these issues early can prevent bigger problems down the road.
How to Prevent or Handle a Breach
Preventing Issues Before They Start
- Get It in Writing: A well-drafted partnership agreement should spell out each partner’s responsibilities, decision-making power and policies about conflicts of interest.
- Set Up Oversight Measures: Regular financial reviews, open communication and third-party audits can help catch problems before they escalate.
- Encourage Transparency: Having open conversations about business decisions and potential conflicts help keep everyone on the same page.
- Consult a Lawyer Early: The best time to get legal advice is before there’s a problem. A proactive approach can save you a lot of stress and money.
What to Do If a Partner Breaches Their Fiduciary Duty
If you suspect a breach, here’s what to do:
- Document Everything: Keep records of emails, contracts, financial transactions and anything else that supports your claim.
- Try to Resolve It Internally: Sometimes, a direct conversation or mediation can get things back on track.
- Know Your Legal Options: If the breach is serious and causes financial harm, you may need to take legal action, whether that means suing for damages, forcing the partner out, or dissolving the partnership.
Protect Your Business with Tempus Fugit Law
Business partnerships thrive on trust. When that trust is broken, you need to take action. At Tempus Fugit Law, we help business owners prevent fiduciary issues before they start and fight for their rights when things go wrong.
If you’re dealing with a partnership dispute or just want to make sure your legal bases are covered, call (617) 752-2371, email inquiry@tflawllc.com or contact us here on our website today. The right legal guidance can mean the difference between a setback and success.
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