In Maryland, certain people within a business carry a legal obligation to act in the best interest of the company and its owners. Managing partners, officers, directors, and majority shareholders all fall into this category. That obligation is called a fiduciary duty, and when it is violated, the damage to a business can be significant.
The two most fundamental components are loyalty and care. Loyalty means your partner cannot place their personal interests ahead of the company’s. Care means they are required to make reasonable, informed decisions on behalf of the business.
Common Signs a Partner May Be Breaching That Duty
Not every internal business dispute rises to the level of a fiduciary breach. That said, certain patterns are worth taking seriously. Common warning signs include:
- Approving payments or contracts that personally benefit themselves without disclosing the conflict
- Withholding financial records or important company information from co-owners
- Steering business opportunities to a separate company they own or control
- Making major decisions without proper authority or partner input
- Taking on company debt or obligations without notifying the other partners
Any one of these can be a red flag. A single lapse in judgment looks very different from a deliberate pattern of concealment.
Self-Dealing and Conflicts of Interest
Self-dealing is one of the most common forms of fiduciary breach. It occurs when a partner uses their position for personal gain at the expense of the business or its other owners. That might mean awarding contracts to a vendor they have a financial interest in, or quietly redirecting clients to a competing venture they own on the side.
Maryland courts take these situations seriously. Under the Maryland Corporations and Associations Article, officers and directors are held to a high standard of loyalty and good faith, and courts have consistently reinforced that standard in business disputes.
Misuse of Company Funds
Financial misconduct is another significant area. If a partner is drawing excessive compensation, making unauthorized distributions, or using company accounts to cover personal expenses, those actions may support a breach of fiduciary duty claim. The challenge is that documentation is often incomplete or has been deliberately obscured.
This is why working with a Gaithersburg business litigation lawyer early in the process matters. An attorney can help you identify what evidence you need and take steps to preserve it before records are altered or destroyed.
What Are Your Options
If you believe a partner is violating their fiduciary duty, start by documenting everything you have access to. Financial records, emails, meeting notes, and your original partnership agreement are all important starting points. From there, your legal options may include:
- Seeking an injunction to stop the harmful conduct from continuing
- Pursuing damages for financial losses that the business or you personally suffered
- Requesting a formal accounting of company finances
- Exploring a buyout or dissolution if the partnership has broken down beyond repair
The right course of action depends on the specific facts and the outcome you are trying to reach. Some disputes are resolved through negotiation. Others require litigation.
Get Legal Counsel
Fiduciary duty claims are fact-intensive and tend to be contested. The sooner you seek legal guidance, the stronger your position will be. Eric Siegel Law has spent over 30 years helping Maryland business owners address disputes involving partners, officers, and directors. If something feels wrong inside your business, contact a Gaithersburg business litigation lawyer from our team to discuss what options are available to you.