Can a Partnership Sue a Partner?

Yes, a partnership may be able to sue a partner, commonly due to breach of fiduciary duty. A partnership is a type of business arrangement where two or more people agree to share the profits, losses, and liabilities of a jointly-owned business. In a general partnership, each partner must accept unlimited personal liability for the partnership’s debts, which means that the partnership’s creditors can sue an owner individually and seize their personal assets to cover the business’s liabilities. 

Often, partnerships will create formal agreements that outline the duties and obligations of each partner in the business. If this partnership agreement is legally valid and enforceable, a partnership may be able to sue a partner who breaches their specified partnership duties. To successfully sue in this situation, the partnership must show that the business suffered damages because of the partner’s breach.

Can a Partner Sue Another Partner?

Yes, a partner can sue another partner in a partnership if they have the legal grounds to do so. One of the most common reasons that a partner can sue another partner is a breach of fiduciary duty.

In a business partnership, partners owe each other one of the highest legal duties possible: a fiduciary duty. This means that partners must place the best interests of the partnership and the other partners above their own personal interests. 

A fiduciary duty requires a variety of commitments from a business partner, including duties of care, honesty, loyalty, and fairness. Partners must also act in good faith in their business dealings and cannot profit personally at the expense of the partnership. 

If a partner engages in any of the following activities, they may have breached their fiduciary duty:

  • Misrepresenting or withholding material facts 
  • Engaging in self-dealing
  • Poaching company opportunities
  • Failing to account for partnership profits
  • Engaging in other activities that hurt the company’s interests

When one partner breaches their fiduciary duty, another partner (or all of the other partners) can pursue a civil lawsuit against the breaching partner. If the lawsuit is successful, the breaching partner can be held financially liable for any losses that resulted from their violation.

How Do You Protect Yourself From a Business Partnership?

In a business partnership, there is inherent risk. Partners are responsible for each other’s actions and liabilities, which can lead to serious problems if one partner does not fulfill their obligations. No matter how much you trust your business partner, it is essential that you take steps to protect yourself.

Create a Detailed Written Partnership Agreement

One of the best ways you can make sure your interests are protected when entering a partnership is to execute a detailed partnership agreement that puts all of the important details into writing. Even if you know your partners well and trust them, having a written partnership agreement can help prevent disputes by ensuring every partner is on the same page. It will also serve as the basis for resolving disagreements that may arise in the future. 

Your partnership agreement should include at least the following information:

  • Each partner’s capital contributions and ownership interests
  • Each partner’s role, duties, authority, and responsibilities
  • How partnership business decisions will be made
  • How conflicts will be settled
  • Buyout terms if one partner dies, becomes incapacitated, or wants to exit the partnership

Limit Your Personal Liability

An important consideration to keep in mind when forming a partnership is that you can be held personally liable for the partnership’s debts. As such, you should always take steps to reduce your personal exposure and protect your assets.

One way you can limit your liability is to include restrictions on the amount of debt a single partner can accrue for the partnership without the consent of the other partners in the partnership agreement. If this term is left out of the agreement, any partner will be able to expose the partnership (and your personal checkbook) to unlimited liability.

It’s also essential to ensure the partnership maintains sufficient capital to cover its business expenses and invest in a comprehensive liability insurance policy for the business. While the extra expense may be hard to stomach, a solid insurance policy is crucial to protecting yourself from personal liability.

Have Questions?


What Are the Legal Rights and Obligations Afforded by a Partnership?

Can a Partner Be Removed From a Partnership?