Posts tagged "breach of fiduciary duty"

You may have heard about fiduciary duties, something about loyalty and care, but truth be known, you have no idea what that all means. Let’s set the scene. Your startup company is up and running. You have consulted with your startup lawyer  about forming the company as a limited liability company. What duties do you owe to those who have invested in the company. They are after all part owners and have invested their hard-earned money into your company. You talk with your startup lawyer and he or she explains that you owe the owners a fiduciary duty—fiduciary what, you ask? If you violate these fiduciary duties, you may be personally liable. Well, that should get your attention. This article discusses what a fiduciary duty is and who it is applied to.

At one time or another there will be an end to your business. When you started your business, you should have developed an exit strategy, but sometimes things don’t go as planned. The business may end happily in a merger or acquisition and sometimes less happily by dissolution or bankruptcy. Without clear guidelines at the outside, you will find that extricating yourself from your partners may be costly. A business divorce may have similar acrimony to a family divorce. In a family divorce, there is the combustible combination of kids and money. In a business divorce, the business partners undoubtedly will also argue about money—and will contend for control over their business, which for founders, can be like an extension of their families. The disputes among partners are not easy disputes. And business divorces like their family counterparts have numerous moving parts in various areas of the law such as business organizations, contracts, unfair trade practices, employment law and trade secrets. This article summarizes some of the considerations you should keep in mind when discussing with your small business lawyer what steps you and your partners should take to minimize the risk of a messy divorce with your partners down the line.