Can You Sue a Business Partner for Breach of Fiduciary Duty?
Business partners owe each other real, enforceable legal duties, not just an informal expectation of fair dealing.
By Michael Tamou · Updated August 14, 2026
What Fiduciary Duties Do Business Partners Owe Each Other?
Quick answer: Yes, business partners generally owe each other duties of loyalty and care. For LLC members and managers, these duties are set out under A.R.S. § 29-3409, requiring good faith dealing, avoiding self-dealing and competing interests, and acting in the company’s best interest. A partner who breaches these duties, through self-dealing, diverted opportunities, or mismanagement, can be held liable for the resulting harm.
On This Page
- What Fiduciary Duties Do Business Partners Owe Each Other?
- Where These Duties Come From
- The Duty of Loyalty
- The Duty of Care
- Common Fact Patterns in Partner Fiduciary Duty Disputes
- What You Need to Prove
- Gathering Evidence Without Tipping Off Your Partner Prematurely
- Available Remedies
- Practical Steps if You Suspect a Partner Has Breached Their Duties
- FAQs
Where These Duties Come From
Business partners do not just have a business relationship, they have a legal relationship with real, enforceable obligations attached to it. For LLC members and managers, A.R.S. § 29-3409 establishes duties of loyalty and care, along with an obligation of good faith and fair dealing in how partners deal with each other and the company.
These statutory duties reflect a basic reality: partners often have significant access to company assets, information, and decision-making authority, and the law does not allow that access and authority to be used purely for one partner’s personal benefit at the expense of the others.
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The Duty of Loyalty
The duty of loyalty generally requires a partner to avoid using company opportunities, assets, or information for personal benefit, and to avoid competing directly with the business while still a partner. This is often the core of a fiduciary duty claim between partners.
Common violations include a partner starting a competing business on the side, taking a business opportunity that should have gone to the company, or using company funds or resources for personal purposes without proper authorization.
The Duty of Care
The duty of care generally requires a partner involved in managing the business to act with reasonable diligence, not recklessly or with gross negligence in a way that damages the company. This duty is typically judged against a standard of reasonable business judgment, not perfection in every decision.
Ordinary business mistakes, a deal that did not work out, a reasonable decision that in hindsight was wrong, generally do not violate the duty of care. This duty is aimed at genuinely reckless or grossly negligent conduct, not honest business judgment that simply did not pan out.
Common Fact Patterns in Partner Fiduciary Duty Disputes
- Self-dealing, a partner directing company business to another entity they personally own or control.
- Diverted opportunities, a partner personally taking a deal or client that should have belonged to the partnership.
- Misuse of company funds, using business accounts or assets for personal expenses.
- Competing businesses, a partner secretly operating a competing venture while still a partner.
What You Need to Prove
Generally, you need to establish that a duty was owed (which typically flows automatically from the partnership relationship itself), that the partner’s specific conduct breached that duty, and that the breach caused real, quantifiable harm to you or the business.
Vague suspicion or general dissatisfaction with a partner’s conduct is not enough on its own, a viable claim requires identifying specific transactions, decisions, or conduct, supported by documentation, financial records, communications, that demonstrate the breach actually occurred.
Gathering Evidence Without Tipping Off Your Partner Prematurely
In many partnership disputes, quietly gathering available financial records, communications, and documentation before confronting a partner or filing suit gives you a much stronger evidentiary position than raising concerns first and potentially prompting the other side to destroy or alter records.
This needs to be balanced carefully with your own legal and fiduciary obligations as a partner, an attorney can help you think through how to build your case without creating additional legal exposure of your own.
Available Remedies
Depending on the facts, remedies for a proven breach of fiduciary duty can include monetary damages for the harm caused, disgorgement of any profit the breaching partner improperly obtained, and in serious or ongoing cases, injunctive relief to stop the harmful conduct from continuing.
In more severe situations, a fiduciary duty breach can also support, or overlap with, a broader claim for dissolution or judicial expulsion of the breaching partner from the company.
Practical Steps if You Suspect a Partner Has Breached Their Duties
- Gather available financial records and communications before raising concerns directly with your partner.
- Identify the specific transactions or conduct that appear improper.
- Consult an attorney before confronting your partner, to understand your legal options and avoid weakening your position.
- Consider whether formal legal action, negotiation, or a structured buyout best fits your specific situation.
Suspecting a partner breached their duties in Arizona? Talk to our litigation team before you respond.
Call 602-932-6010Related Practice Areas
Partnership and Shareholder DisputesFiduciary Duty LitigationBusiness Tort LitigationCan You Sue a Business Partner for Breach of Fiduciary Duty? FAQs
Does this apply to corporate shareholders too, or just LLC partners?
Corporate directors, officers, and controlling shareholders owe related fiduciary duties recognized under Arizona case law, the specific statutory framework differs slightly between LLCs and corporations, but the underlying principle is similar.
What if my partnership agreement doesn’t specifically mention fiduciary duties?
These duties generally arise from the partnership or membership relationship itself, and from Arizona statute for LLCs, they typically do not need to be separately written into the agreement to apply.
Can a partner waive these duties in the operating agreement?
Some aspects can potentially be modified by agreement within certain statutory limits, but this is a nuanced area, an attorney should review your specific operating agreement to evaluate what it actually permits.
What if I can’t prove exact dollar damages, just that something seems wrong?
An attorney and, where appropriate, a financial expert can help investigate and quantify damages, having a specific number is not required to begin evaluating whether a viable claim exists.
Can I remove a partner who has breached their fiduciary duties?
Depending on the severity and your governing documents, judicial expulsion or a forced buyout may be available under A.R.S. § 29-3601/29-3602 for a partner’s wrongful conduct or persistent material breach.
How long do I have to bring this type of claim?
This depends on the specific facts and claims involved, do not delay, consult an attorney promptly to understand the applicable deadlines for your situation.
What if the breach happened years ago but I only just discovered it?
Depending on the circumstances, discovery of concealed misconduct can affect when the clock starts running on your claim, this is worth discussing with an attorney as soon as you learn of the issue.
Key Takeaways
- Business partners owe each other real, enforceable duties of loyalty and care, not just informal expectations.
- For LLC members and managers, A.R.S. § 29-3409 establishes these statutory duties.
- Self-dealing, diverted opportunities, and misuse of company funds are common violations.
- Specific, documented conduct is required to prove a breach, not general suspicion.
- Remedies can include damages, disgorgement of improper profit, and in serious cases, removal of the breaching partner.
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