When partners form a business, they trust that each person considers the company’s best interest a priority.
Unfortunately, that is only sometimes the case. While simple disagreements may end in a split of the partnership, others might end up in court.
Business partners may act negligently in various ways. These acts are negligent if they act recklessly without regard to their partners, enter into risky business contracts, or hire unfit employees. To file a negligence claim, partners must prove the business suffered due to the other partners’ actions and that a reasonable person would not have acted in such a way.
Breach of fiduciary duty
When one partner puts their own interests ahead of the business, this can be a breach of fiduciary duty. Common acts that breach this duty are:
- Poor decisions that lead to financial losses
- Improper use of company resources
- Misappropriation of funds
To prove a breach of fiduciary duty, the other partners must prove the violating partner had a duty of loyalty and care towards the business.
Violation of the partnership agreement
Most business patterns sign an agreement when starting their company. This agreement can entail how funds get spent, who makes decisions and what to do when one party does not follow through as agreed. If a partner violates any part of the signed legal agreement, the remaining partners can take action against the violator.
Knowing what a violation of a business partnership is may encourage partners to pursue action to stop these activities to protect the future of their businesses.