Every business partnership is built on “fiduciary duty,” and every partner has duties and obligations to the others. In essence, each partner must deal with one another in good faith. When partners are acting in good faith, they are behaving in a manner that is in the collective best interest of the underlying business. When entering into a business partnership, it is important to remember these fiduciary duties:
- Partners must act for the collective best interest and not for their own personal interests.
- Partners must not divert opportunities away from the business for personal gain.
- Partners also cannot take or divert assets of the business to start a competing business.
- The majority partner cannot take actions for the sole purpose of suppressing the rights of a minority partner.
- Partners must abide by their partnership agreement.
- Non-controlling partners cannot withhold their votes for the purpose of causing inaction.
- Non-controlling partners also cannot refuse to carry out duties that were properly voted on by the majority.
When a partner fails to live up to his or her fiduciary duties, it could result in partnership litigation. Partnership litigation is a tool that you can use to protect and defend your business interests. During the litigation process, you will have to set forth the duties you have as partners and how those duties and obligations were not met. You will need evidence that supports your case and proof of the actions you took before filing litigation. Your actions and communications will come under scrutiny. So, it will help to have documented conversations leading up to the dispute. Remember, your partner and his or her lawyer will have an opportunity to argue that you broke your fiduciary duties as well.
Therefore, you should review all of your actions before filing a claim against a partner. Partnership litigation is an important and necessary tool, but it is also a double-edged sword. It is advisable to consider pre-emption and early pre-litigation planning before making any decisions that could affect your business and your financial future. To discuss your options with an experienced partnership litigation attorney, call The Internicola Law Firm, P.S.