A business partnership involves at least two partners, although it can be more. The nature of the partnership will depend on the contractual agreement.
Nonetheless, whatever structure the partnership takes, all business partners are fiduciaries. This means that they have certain duties that must be honored. They must always act in the best interests of the company.
Here are some of the key fiduciary duties of business partners.
The duty to be honest
Partners have a fiduciary duty to be honest and transparent in their dealings. Major decisions should be discussed with other partners and shareholders. The business funds should never be used for personal profit. If a partner is dishonest or engages in self-dealing (personal profit), then they have breached their fiduciary duties.
The duty to be careful
Everyone, including business partners, can make honest mistakes. Nonetheless, partners have a duty to act diligently. Reckless decisions that place the company in jeopardy are a breach of fiduciary duty. For example, if a business partner makes a significant investment without conducting any due diligence.
The duty to be loyal
Business partners have a duty to be loyal. While they can work with other companies, they should not work with direct competitors. This is a conflict of interest, which is one of the most common forms of fiduciary breaches.
Being a business partner is a huge responsibility that comes with fiduciary duties. Fiduciary breaches can result in partnership disputes. It is vital to settle these efficiently to prevent financial and reputational damage. Seeking legal information will help you to protect your rights and your business.