Your Business Partner Shut You Out? Know Your Florida LLC Options

Business Partner Stole My Business? Your Florida LLC Options

If a business partner stole my business, the first step is knowing which claim fits. You may have claims under Florida law when a co-owner takes company money, property, or opportunities, or shuts you out. The right claim depends on how the company is organized, who manages it, and who was harmed. KEW Legal helps business owners and investors in Miami-Dade and South Florida, with offices in Coral Gables and Sunny Isles Beach.

What does it mean when a partner takes your business?

A partner takes your business when a co-owner uses company property, profits, or opportunities for personal gain. It can also mean a partner blocks your access to decisions, records, or money. Florida law sets the duties each owner owes.

For an LLC (limited liability company), Fla. Stat. § 605.04091 says each manager of a manager-managed LLC and each member of a member-managed LLC owes duties of loyalty and care. The duty of loyalty includes:

• Accounting to the company for any property, profit, or benefit taken from company business.
• Not competing with the company before it dissolves.
• Not dealing with the company as someone whose interests are against it, unless the deal meets the statute’s conditions.

The duty of care means refraining from grossly negligent or reckless conduct, willful or intentional misconduct, or a knowing violation of law. A manager of a manager-managed LLC and a member of a member-managed LLC must discharge their duties and exercise any rights consistently with the obligation of good faith and fair dealing.

Self-interest alone does not prove a breach. The same statute says a member does not violate a duty solely because its conduct furthers its own interest. The facts decide the question.

Conflicts matter too. Under Fla. Stat. § 605.04092, a member can be “indirectly” a party to a deal. That happens when the member has a material financial interest in the other party, or is one of its officers, directors, members, managers, or partners.

If your business is a general partnership rather than an LLC, different rules apply.

Direct action or derivative action?

A direct action is for harm to you. A derivative action is for harm to the company. The label matters because the statute sets different requirements for each.

Direct action for your own injury

Under Fla. Stat. § 605.0801, a member can sue another member, a manager, or the LLC to enforce its own rights. That includes rights under the operating agreement. Under Fla. Stat. § 605.0801, a member maintaining a direct action under this section must plead and prove either:

• An actual or threatened injury to you that is not solely the result of an injury to the company.
• An actual or threatened injury from breach of a separate statutory or contractual duty the wrongdoer owed you, even if it overlaps with the company’s injury.

Derivative action for injury to the company

Under Fla. Stat. § 605.0802, a member can sue to enforce a right of the company. First, the member must demand that the managers or other members take action. If they do not act within a reasonable time, not to exceed 90 days, the member may sue.

The first is when a demand would be futile. The second is when waiting would cause irreparable injury to the company.

When a partner drains company cash, the company is usually the one harmed. That is why the claim type needs careful review.

Getting access to company records

When an LLC refuses to let you see its records, KEW Legal can review your situation and explain your options. Call 305-990-2300 to schedule a free, confidential first consultation with no obligation to continue.

Keep a written record of every request, its date, and the response.

Deadlock, dissolution, and buyouts

Under Fla. Stat. § 605.0702, a manager or member may ask a circuit court to dissolve the company. Listed grounds include:

• Conduct of all or substantially all of the company’s activities and affairs that is unlawful.
• Managers or members in control acting illegally or fraudulently.
• Assets being misappropriated or wasted, causing injury.
• Deadlock where the members cannot break it and irreparable injury is threatened or being suffered.

Read the operating agreement first. If the company is deadlocked, the members cannot break the deadlock, and irreparable injury to the company is threatened or being suffered, a deadlock sale provision in the operating agreement that was initiated before a court finds deadlock grounds applies instead of judicial dissolution, as long as it is then carried out under its terms. These provisions can call for a buyout, a governance change, or a sale of the company.

Trade secrets, competing, and moved assets

If your partner used confidential information, such as customer lists or pricing, Florida’s trade secret law may apply.

• Damages: Under Fla. Stat. § 688.004, damages can include actual loss and unjust enrichment not counted in actual loss. For willful and malicious misappropriation, the court may award exemplary damages up to twice the award.
• Court orders: Under Fla. Stat. § 688.003, actual or threatened misappropriation may be enjoined.
• Time limit: Under Fla. Stat. § 688.007, the action must be brought within 3 years after the misappropriation is discovered, or should have been discovered with reasonable diligence.

If a partner moves assets to hinder or defraud a creditor, Florida’s fraudulent transfer statute may apply. Fla. Stat. § 726.105 lists factors courts may weigh, such as a transfer to an insider or concealment of the transfer.

Deadlines to keep in mind

• Derivative demand: The other members or managers get a reasonable time to act, not to exceed 90 days, unless a demand would be futile or irreparable injury would result to the company.

When a deadline starts and whether it applies depends on the facts. Don’t wait to find out.

Mistakes that can hurt your position

• Cutting off a partner on your own. If you hold a manager or member role, the good faith duty applies to you too.
• Waiting to document. Save bank statements, emails, texts, and every records request.
• Skipping the demand. A derivative claim usually requires a written demand first.

Why KEW Legal for this matter

• KEW Legal is a Florida business law firm with offices in Coral Gables and Sunny Isles Beach.
• The firm acts as outside general counsel for business owners and investors across Miami-Dade and South Florida.
• The work covers partnership disputes, vendor disputes, employee issues, buying, selling and succeeding a business, contracts and commercial leases, and investment property.
• Kristina E. Wilson is the attorney responsible for this page. Our team of assistants and office staff supports the practice.

Frequently asked questions

Talk through your situation

If a business partner stole my business, you do not have to sort out the options alone. If your partner has cut you out of records, money, or decisions, you may have a claim worth reviewing. You can reach KEW Legal at 305-990-2300 or through our contact page. The first consultation is free, confidential, and carries no obligation to continue.