Legal Duties Between Iowa Partners
The Holidays are upon us, and just as tempers can unfortunately flare during family gatherings, so too can they flare between partners at Holiday parties. And while frustrations arise for good, bad, and other reasons, knowing whether a valid legal reason exists – as opposed to a personal, trivial issue – is important to know for the future of your business and partnership. To this end, partners often wonder what, if any, legal duties they owe to each other and the partnership generally. This post quickly identifies two legal duties that partners owe to each other and to the partnership under Iowa law.
This blog frequently discusses fiduciary duties relative to companies and corporations (e.g. here, here, here), but it is important to remember fiduciary duties extend to other business entities, including partnerships. Just as Iowa’s legislature adopted laws imposing fiduciary duties upon members in a LLC and directors and officers in a corporation, so too have they adopted laws imposing fiduciary duties upon partners in partnerships.
Among other legal duties, black-letter Iowa law imposes two (2) fiduciary duties upon partners in a partnership. The two (2) fiduciary duties that partners owe to each other and to the partnership are: (1) the duty of loyalty; and (2) the duty of care.
Duty of Loyalty. Pursuant to Iowa law – and as of the date of this post – a partner’s duty of loyalty requires the partner, to among other things, account to the partnership and hold as trustee for the partnership any property, profit, or benefit derived by the partner in the conduct of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity. In other words and generally speaking, partners need to track and hold for the benefit of the partnership any and all benefits obtained by an individual partner as a result of the partnership. Further, this duty also states that a partner is to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership (i.e. it legally ends).
Duty of Care. Pursuant to Iowa law – and as of the date of this post – a partner’s duty of care requires the partner to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. If a partner engages in illegal, grossly negligent, reckless, or intentional misconduct, the partner may be liable to the partnership and others partners for losses and other damages.
These basic guidelines (further outlined in this Iowa law code section), which are not exhaustive of all legal obligations between partners, provide a basic legal framework for how Iowa law requires partners to interact with each other and the partnership itself. Should you have questions about your legal duties or the legal duties that a partner owes to you or your partnership, or how a partner’s wrongful conduct may give rise to a claim for damages, you should consider contacting a licensed attorney that practices in the area of corporate disputes.
To read more about partnership law in Iowa, see this prior post about inadvertent partnerships in Iowa.
Innovative Litigation, L.L.C., as owner and host of this site, and Matthew McKinney as the author (acting on behalf of and through Innovative Litigation, L.L.C.) cannot and does not warrant the accuracy or reliability of the information presented on or through this site. The law can and does change over time and the information contained herein may not reflect the most recent laws – whether statutory law, administrative law, case law, constitutional law, or otherwise. The information on this website does not constitute legal advice and readers should not rely on it to solve problems or other matters. Further, you should seek licensed counsel in the appropriate legal jurisdiction before taking any action. Any information provided on this site is presented “As Is” for your personal curiosity and enjoyment. It is not meant to be relied upon for legal advice, counsel, or for any other purposes. Such information does not take the place of a lawyer. Rules and laws differ by jurisdiction and the information contained within this website may not apply in your jurisdiction. The appearance of articles, listings, or ads, by or for professionals, on this site, does not constitute an endorsement. In all cases, you are responsible for determining the quality of services, information, and/or advice provided by professionals through, or as a consequence of, your use of this site. Neither liability nor responsibility shall arise to any person or entity with respect to loss or damage caused (or alleged to be caused), directly or indirectly, by information posted on this website, or by reason of contact with a professional listed on, or posting information to, this site. No attorney-client relationship is formed by viewing this website and practice is limited to jurisdiction where lawyers are admitted. The information furnished on the website is only general and not a substitute for personalized legal advice. Legal advice cannot be given without full consideration of all relevant information relating to the individual(s) situation. Laws can change daily and new laws may, and likely will, affect the accuracy of the information herein. The information herein may be outdated and replaced by new law.
If you are seeking representation, please read the following notice before sending an e-mail:
Sending an e-mail will not make you a client. Until an agreement regarding representation is reached with you, anything you send will not be confidential or privileged. Before representation can occur, a lawyer will first take you through the conflict of interest procedure and see that you are put in touch with the lawyer best suited to handle your matter.
If you proceed with an e-mail, you confirm that you have read and understood this notice.