In Florida, certain business relationships impose added duties and responsibilities. For example, when one party owes a fiduciary relationship to another, they will be required to conduct themselves and their business activities according to specific rules and standards. When these duties are owed, certain circumstances can lead to a breach. If you are in a fiduciary relationship with another party, it’s essential to know how to avoid breaching your fiduciary duty.
What is a Fiduciary Duty?
A fiduciary duty is a type of responsibility that arises when there is a relationship where one party is obligated to make decisions for the benefit of another party. For example, corporate officers and directors and shareholders, business partners, brokers and clients, and limited liability company managing members and members all have fiduciary relationships. Fiduciary duties can also be implied under certain circumstances. When a party owes another party a fiduciary duty, they must make decisions that place the other party’s best interest above their own.
Types of Fiduciary Duties
In Florida, there are two main types of fiduciary duties:
- The Duty of Care—The duty of care requires the obligated party to act as a reasonable and prudent individual would under the same circumstances.
- The Duty of Loyalty—The duty of loyalty requires the fiduciary to act in the other party’s best interests. Generally, this duty includes acting in good faith and honestly.
Understanding Your Duties as a Fiduciary
A good way to avoid breaching your fiduciary duty is by recognizing your responsibilities. When a fiduciary relationship is statutory, the law will specify fiduciary obligations. For instance, Florida law imposes fiduciary duties for business partnerships. The law provides specific details about these parties’ responsibilities toward one another. Corporate officers also have certain obligations regarding the corporation’s shareholders under the law. Knowing what is required of you as a fiduciary from the beginning of the relationship can help you avoid significant mistakes and potential breaches.
Knowing What to Avoid
Generally, breaches occur when a fiduciary puts their own interests above that of the other party. The breach will often be evident because the breaching party realized some financial benefit related to their fiduciary relationship. That does not mean that a fiduciary can’t profit in all circumstances. However, the ways in which they do so must not violate their responsibilities to the other party. For example, this type of breach may occur when the fiduciary fails to disclose information, engages in prohibited financial dealings, or uses insider information for their benefit. Not every infraction will rise to the level of a breach. Further, some practices you can adopt can help you minimize conflict.
If you have a fiduciary relationship, it’s important that you understand your obligations and how to avoid circumstances that could lead to a breach. The best way to get the information you need to protect your interests is by working with an experienced Florida business attorney.
Contact an Experienced Florida Business Attorney
When you are a member of a Florida limited liability corporation, a partner, or a corporate officer or shareholder, understanding fiduciary duties is crucial. Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent small business clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.