The managing partner of a business structured as a partnership takes on the responsibility for its day-to-day operations. He or she has decision-making authority whereas the other partners may provide operating and growth capital in exchange for the business’s proceeds. Under California’s Corporations Code, a managing partner owes fiduciary duties to both the partnership and to its partners and those obligations include exercising a duty of loyalty and a duty of care.
Meeting the requirements of a duty of loyalty and duty of care
When making business decisions, a managing partner must act out of loyalty to the partnership. He or she cannot compete with the business in a manner such as using it to procure contracts for another enterprise. The law considers a managing partner as a trustee who oversees property and funds for the partnership’s benefit. A duty of care requires a managing partner to exercise caution when making decisions that affect the partnership or its assets. He or she must act as any reasonable individual would and without recklessness, carelessness or disregard for the law.
Outlining duties and the remedies for a breach
Individuals considering a partnership should definitely consider outlining an enforceable agreement. Clauses may outline the activities a managing partner can carry out on behalf of the partnership and the penalties for deviating from the agreement. Terms may also specify how partners can vote to remove a managing partner who has breached a duty. An experienced business law attorney can help ensure the appropriate provisions are outlined as they pertain to specific circumstances and goals.