Types of Fiduciary Duties

A partnership is agreement among two or more parties who bring forth resources or capital to establish a business. Dissimilar to corporate entities, partnerships are not required to pay income taxes. When partnerships are formed every partner involved agrees to certain conditions. Whether written formally or expressed verbally there are certain fiduciary duties that must be acknowledged. Generally speaking, in a partnership each party owes good faith, fairness, loyalty, and honesty. These fiduciary duties can be found within different contexts and circumstances.


By law any party involved in the partnership owes a duty to shareholders involved. These duties are usually defined as loyalty. A level of transparency should always be maintained. Although these laws vary by state it is unlawful to keep information from shareholders involved. Directors and corporate officers must always share relevant information. Failure to do so fosters an environment of distrust and dishonesty. Partnerships that are void of these qualities often fail quickly. Sometimes the nature of these agreements are often ambiguous and difficult to measure because of this breaches are sometimes made unintentionally. However, there are definite ways to identify breaches. Insider trading and abuse of power inflicted onto minority shareholders are examples of clear breaches.


This type of duty requires partners to be honest and fair when dealing with each other. Full disclosure of all factors that could potentially harm the partnership. Accepting responsibility for all profits or losses. Not engaging in behavior or activities that are financially beneficial to you, but harm other partners. Partners can be accused of negligent behavior in the partnership if the behavior is detrimental to the success of the partnership. Sometimes it can be difficult to differentiate intentional negligent behavior and accidental errors in judgement. Sometimes partners overestimate, over calculate, or overshoot with no intention of harming the business.


The foundation of fiduciary duties has always been and will always be closely involved with trustees. Trustees also assume of level of fiduciary responsibility. The most common duty of a trustee is to place the interest of the beneficiary above all else. Among this is the duty of complete disclosure of all necessary facts and the duty to keep record of accurate accounts. Simply put the duty of a trustee is to protect and secure all properties and investments of the beneficiary.


Fiduciary duties of this type operate simply on a creditor debtor premise. Laws typically favor the lender rather then the borrower for obvious reasons. Lenders can be seen as a fiduciary under many circumstances. The most common are situations in which they take over for a borrower. Another common example is when a lender a personal relationship can be identified between the two parties. Whenever a lender completes a task or assumes a responsibility designated for the borrower, they can be seen as a fiduciary.

If you are a partner facing a lawsuit and seeking legal counsel, feel free to contact us at Byrd Davis Alden & Henrichson, LLP. Our Austin partnership & fiduciary duty attorneys want to help you with your business litigation & defense case.