Can A Business Partner Be Held Liable For The Partnership Is Underperforming?

Entering a business partnership is a big decision that requires careful consideration and due diligence. It is important to clearly define the terms of the partnership through a written agreement and to establish a solid foundation of trust and mutual respect. It is also crucial to ensure that both parties have a shared vision and goals for the business.

This raises an important question: Can a business partner be held liable if the partnership underperforms? The answer depends entirely on the terms of the partnership agreement and the nature of the underperformance. Here, our West Palm Beach partnership lawyers explain the key things to know about holding a partner liable if your business partnership is underperforming.

You Must Have Legal Grounds to Hold a Partner Liable for an Underperforming Business 

As a starting point, it is important to emphasize that a business partner cannot be held automatically liable because the partnership underperforms expectations. The reality of business is that parties are always required to take on some level of risk. That being said, there are situations in which a partner may bear liability for underperformance. Here are three key circumstances in which a business partner in Florida may bear liability for underperformance:

• Protections (Guarantees) Within Partnership Agreement: If the partnership agreement includes protections or guarantees for each partner’s performance, a partner may be held liable for underperforming if they fail to meet these obligations. A valid partnership agreement is a binding legal contract.
• Breach of the Partnership Agreement: If a partner breaches the partnership agreement in any way, they may be held liable for any resulting damages or losses. This could include failing to contribute their share of the partnership’s profits or failing to fulfill their responsibilities as outlined in the agreement.
• Violations of Florida Partnership Law: In Florida, partnerships are governed by the Uniform Partnership Act (UPA). If a partner violates any provisions of the UPA, they may be held liable for any resulting damages or losses. Among other things, violations may include breach of the duty of loyalty (self dealing) or breach of the duty of care. 

Business partnership disputes are complex. No two partnerships are exactly alike, and the specific circumstances of each case must be thoroughly examined in order to determine the best course of action. Whether a business partner is liable for losses related to the underperformance of the partnership depends on many different factors, including the partnership agreement, the representations that were made to you, and the conduct of your business partner(s). A Florida lawyer with experience in handling business partnership disputes can help to navigate the process.

 Set Up a Confidential Consultation With a Top Florida Partnership Law Attorney

At Pike & Lustig, LLP, our Florida partnership lawyers provide sophisticated, diligent, and effective legal advocacy to our clients. If you have any specific questions or concerns about a legal dispute over an underperforming partnership, we are here to help. Get in touch with us by phone or connect with us through our website for a completely confidential case assessment. Our firm is positioned to handle partnership disputes in communities throughout Southeastern Florida.