Business partnerships depend on trust and shared goals. When a partner puts personal gain ahead of the business, it may raise concerns about fiduciary duty. Knowing the warning signs can help protect your investment and your business.
What actions indicate self-dealing?
Self-dealing happens when a partner uses their role to gain personal benefits at the business’s expense. New Jersey law requires partners to follow duties of loyalty and care, subject to the partnership agreement and applicable law. A partner who takes a business opportunity for a separate venture or makes deals that favor their own interests may breach these duties.
Courts may look at whether the partner disclosed the conflict and got informed consent from the other partners. Secret deals that unfairly benefit one partner may point to a breach of fiduciary duty. Unusual payments or transfers to businesses controlled by a partner may also raise concerns.
How can hiding information signal a breach?
Partners have duties to share key information about the business. A partner who withholds information that another partner reasonably needs to carry out their role may raise concerns about a breach of duty. This can prevent other partners from making informed decisions about the business and its risks.
Missing records or resistance to routine accounting practices may signal that a partner is hiding information. A partner who blocks access to business records or keeps separate records may be trying to conceal their actions. Such conduct may serve as evidence of business misconduct.
Taking the next step
If you suspect a partner has breached their fiduciary duties, keep all relevant records and messages. An attorney who understands partnership law can explain your legal options and help you decide what to do next.