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Fiduciary duties in a business partnership

On Behalf of | Aug 24, 2021 | Business Law |

Partnerships are some of the most common business structures in Georgia. They’re appealing in part because they’re less complex than a corporation. However, one downside to this arrangement is evident when considering what happens when a partner abandons the business.

Duties and partnership

When people enter into a business partnership, the law holds that they have certain fiduciary duties to one another. These duties include loyalty, care and the responsibility to act in good faith. When one partner breaches these duties by leaving a business in a negative way, business litigation may be one outcome.

The end of a partnership

When one partner leaves a business, it often means that the company will be dissolved. This can be hard for the remaining partners to accept. Ultimately, the outcome will depend on state law and on what’s written into the partnership agreement. In some cases, a partner can be said to have abandoned their partners and the business they shared.

It may be possible to sue a business partner for abandonment in two limited circumstances. The first is if they leave the business in a way that contradicts the partnership agreement. It can also be possible to sue a former business partner if they have done something to harm the business. It doesn’t matter what their intent was in taking that action.

When entering into a partnership, individuals should think about exit strategies. Will they make it possible for partners to buy each other out, for example? Also, it’s important to consider factors that could impact someone’s decision to leave a business. Do partners have a plan for what might happen if they experience a divorce or death in the family? Planning for the end of a business can actually help it run more smoothly.

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