Business Law Assignment: Fiduciary Duty, Liability, and Partnerships

This assignment addresses key concepts in business law, specifically focusing on partnerships, fiduciary duties, and liabilities. The solution explains how fiduciary duties function within a partnership, emphasizing the importance of trust and the varying obligations based on the type of partnership (general or limited) and the role of each partner (general or limited). It also details the problems associated with partnership liability, particularly the concept of unlimited personal liability, and explores strategies, such as forming a limited liability partnership (LLP), to mitigate these risks. The assignment solution also references relevant legal and economic analysis supporting the concepts discussed, providing a comprehensive overview of the subject matter.

Running head: BUSINESS LAW
BUSINESS LAW
Name of the Student
Name of the University
Authors note

1BUSINESS LAW
1.
In a partnership business, every partner must have the obligations of trust which is
usually known as fiduciary duties. These duties depend upon some factors, such as the type of
partnership firm and the nature of the role played by the partner in that partnership business.
These fiduciary duties can vary based on whether that partner is a member of a general
partnership or a limited liability partnership, and whether the partner is a general partner or a
limited partner within that business. Whether the partner of a general or limited liability
partnership owes any fiduciary obligations towards the other partners of the partnership business
or not also determined by the state statutory legislation, legal precedents and most importantly by
the terms of the agreement of partnership. In running either a general or a limited liability
partnership, partners need to believe and depend upon the other partners, who operate the
partnership for the best interest and advancement of the business. Usually, general partners
participate in the daily operation of the business whereas the limited partners must provide
funding (1). Therefore, in a partnership business and under the fiduciary duties:
 The partners must act with honesty and in good faith to maintain the transparency of the
business;
 One partner must keep and maintain the partnership properties with loyalty and it must
not be used for the personal advantage;
 The partners must act as a reasonable and prudent individual while managing and
administering the partnership; and
 The partners must inform the other about the daily affairs and disclose the material facts
of the partnership.

2BUSINESS LAW
2.
The main problem of a partnership business is the unlimited personal liability of the
partners. It means that the partners associated with a partnership business have unlimited
liabilities. The partners can be held liable jointly concerning all contracts of the firm. Moreover,
if any wrongful act can be performed by any of the partners, then the partners will be held
accountable jointly and individually for the tortious liability. It is also very problematic that a
partner shall remain liable even after the dissolution of the firm until the creditor withdraws it
expressly. However, an incoming partner cannot be held liable for the prevailing outstanding
amount or debts of the partnership unless those debts are accepted by the new partner expressly.
Often, to reduce the liabilities of a partnership business, different techniques have been
adopted by the partners. Among these techniques, the most popular technique is to form a limited
liability partnership. This particular business is considered to be a hybrid type of organization
that combines tax benefits with the feature of limited liability. In this business, limited partners
must provide financial resources and these partners usually enjoy limited liabilities. Whereas,
general partners have to manage the business and the liability of these partners is unlimited.
Moreover, the innocent partners cannot be held personally liable for the tortious liability of the
other partners (2).

3BUSINESS LAW
Reference
1. Sullivan R. Fiduciary duty in the 21st century. Available at SSRN 2724866. 2015.
2. Bainbridge, S. M., & Henderson, M. T. (2016). Limited liability: a legal and economic
analysis. Edward Elgar Publishing.