Business partnerships can be highly beneficial to a company. They provide a platform for partners to share responsibilities, financial capital and liability.
A business partner has a fiduciary duty. Essentially, this means that they must always act in the best interests of the company. A breach of fiduciary duty occurs when a partner does something that puts the company at risk. Here are some common examples.
Self-dealing
While a business partner can have side gigs, they should not utilize the partnership to profit on the side. For example, if a partner took leads from the business and acted on them for the benefit of another project, this may amount to a breach of fiduciary duty. Taking information from one business as a partner and using it for personal profit is commonly referred to as self-dealing.
Helping a rival firm
A breach of fiduciary duty can also arise out of a conflict of interests. For example, if a partner works closely with a rival firm. Simply failing to disclose this information to their business partner may amount to a breach of fiduciary duty.
Negligent conduct
A breach of fiduciary duty can also happen if a business partner acts negligent or recklessly. For example, if a partner fails to report income or mismanaged company funds, this can leave the business in financial trouble. Furthermore, a breach of fiduciary duty based on negligent actions can result in the company being exposed to liability.
Fiduciaries, such as business partners, must take their obligations seriously. If you have been impacted by a breach of these duties, it is in your best interests to seek legal guidance.