Q: I am trying to determine if the actions of my business partner can have her removed from the partnership?
Are any of these considered breach of fiduciary duty/grounds for removal from a 50/50 general partnership with no written agreement? 1) Purchasing prescription drugs illegally and failing a drug test for a client (we work with rehabs). 2) Using business funds to pay personal taxes after specifically being told not to? 3) Taking more distributions than the other partner ($13k more). Thank you!
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- California
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- Answered
A:
Under California law, a general partnership is governed by the Uniform Partnership Act, even if there is no written agreement. A partner's actions can constitute grounds for removal if they breach their fiduciary duty to the partnership.
Purchasing prescription drugs illegally and failing a drug test for a client, especially in a business working with rehabs, can be seen as a significant breach of fiduciary duty. This behavior damages the partnership's reputation and violates legal and ethical standards.
Using business funds to pay personal taxes against explicit instructions and taking more distributions than agreed upon can also be considered breaches of fiduciary duty. These actions demonstrate a misuse of partnership resources and unequal treatment of partners, undermining the trust and financial stability of the partnership.
Given these circumstances, you may have grounds to seek removal of your business partner. Consulting with a legal professional can help you understand your options and the best course of action based on your specific situation.
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