Fiduciary Duty Breaches in Business Context

Fiduciary Duty Breaches in Business Context

In a business context such as LLC’s, traditional corporations, and partnerships all members, Board of Directors, and partners owe a fiduciary duty to the business. The breach of fiduciary duty is a common cause of action used to safeguard business entities and individuals in the corporate setting.

The elements for breach of Fiduciary Duty consist of:

  1. The Plaintiff and Defendant had a fiduciary duty relationship;
  2. The Defendant breached its fiduciary duty to the Plaintiff;
  3. The defendant’s breach resulted in:
  4. injury to the Plaintiff, or
  5. benefit to the Defendant.

A fiduciary duty relationship exists in certain relationships. Examples are partners, board of directors, officers in a corporation, trustees, and attorneys.  When a fiduciary duty is established, then certain duties are enforceable by law. A LLC, Corporation, or partnership may limit certain fiduciary duties within a company’s bylaws or operational agreement, but certain fiduciary duties may never be limited, such as a duty of loyalty and utmost good faith. The following is a list of fiduciary duties that each individual owes to their LLC, Corporation, or partnership absent a limitation provision:

  1. Duty of loyalty and utmost good faith;
  2. Duty to refrain from self-dealing;
  3. Duty to act with integrity of the strictest kind;
  4. Duty of fair and honest dealing; and
  5. Duty of full disclosure.

The abovementioned fiduciary duties are not an exhaustive list and there are certain specified fiduciary duties that exist for certain professions, such as a Trustee or Attorney.

If an officer, director, or partner breach their duty to the business entity there are certain damages that that business entity may sue for. Such as economic damages, out of pocket loses, loss profits, mental anguish, and exemplary damages. The corporate entities may sue an individual for these enumerated damages to make the corporation whole again. Furthermore, where a fiduciary duty applies to each individual, such as in a partnership, the individual may seek these damages personally as well.  

Those in positions of power in an LLC, Corporation, or Partnership have a higher degree of care and responsibilities to the businesses. If you are a business owner or a partner and your business has been injured due the malicious acts of an employee or partner of the business, find an experienced attorney that can make your business whole.


Julian Nacol, attorney
Nacol Law Firm PC