Dealing With a Dishonest Business Partner in Florida

Short answer: Start by reading your governing documents, saving your records, and writing down what you’ve noticed. Then choose a path, such as a written demand, mediation, a buyout, or a lawsuit if the facts support one.

This guide explains how to deal with a dishonest business partner in Miami-Dade and Broward counties. It is general information, not legal advice about your situation. KEW Legal has offices in Coral Gables and Sunny Isles Beach, Florida, and focuses on business law. Some matters may be referred to another lawyer or firm. If yours is, we’ll tell you.

En español: Esta página es publicada por KEW Legal, que tiene oficinas en Coral Gables y Sunny Isles Beach, Florida. Algunos asuntos pueden ser remitidos a otro abogado o bufete. Si el suyo lo es, se lo informaremos.

What Dishonesty Between Business Partners Often Looks Like

Dishonesty usually shows up as money or information that doesn’t add up. Common warning signs include:

• Transfers from company accounts with no clear reason
• Financial statements that arrive late or not at all
• Numbers that change from one report to the next
• Side deals the other owners never approved
• One partner who alone controls the bank accounts or books

Not every disagreement is misconduct. Two owners can argue about pricing or hiring and still act in good faith. The line is crossed when a partner hides money, misleads co-owners, or takes value that belongs to the company. Florida law addresses that conduct directly. Under Fla. Stat. § 605.04091, a member of a member-managed LLC, or a manager of a manager-managed LLC, must account for any profit or benefit gained from company property or company opportunities. A member of a manager-managed LLC generally does not owe these duties solely because of being a member.

Start your own record early. A problem that looks small today can grow. You may be the one being deceived. You may also be tied to a partner who is accused of misconduct. Either way, the first step is the same: understand the facts.

Start With Your Governing Documents

Your governing documents come first. For an LLC, that’s the operating agreement. For a partnership, it’s the partnership agreement. Corporations use bylaws and shareholder agreements. Read yours closely. Look for voting rules, information rights, buy-sell terms, dispute resolution clauses, and removal or expulsion terms.

Check for steps that must happen before a lawsuit. Some agreements require written notice, a cure period, mediation, or arbitration. Under Fla. Stat. § 682.02, an agreement to arbitrate is valid, enforceable, and irrevocable, with limited exceptions. Missing a required step can slow your case.

What if the document is silent or outdated? Florida’s LLC statute fills the gap. Florida Statutes § 605.0105(3) separately provides that an operating agreement may not relieve or exonerate a person from liability for conduct involving bad faith, willful or intentional misconduct, or a knowing violation of law. Check whether any clause tries to do that.

Finally, confirm the company’s status with the Florida Division of Corporations. The Division’s Sunbiz records show whether the entity is on file.

Preserve Records and Protect the Business

Keep copies of the records you can lawfully access. Store them outside the company’s systems, such as on a personal drive. Gather bank statements, general ledgers, tax returns, contracts, payroll records, emails, and texts.

Write a dated log. Note what you saw, when you saw it, and what the partner said. Record who has signing authority and who controls online banking.

Avoid self-help moves. Changing locks, cutting off a partner’s access without authority, or moving company money can create liability of its own. These moves can also weaken your position. If you want fewer unilateral transactions, discuss dual approval, but only in a way your documents allow.

Florida LLCs must keep certain records. Under Fla. Stat. § 605.0410, an LLC keeps a current list of members and managers. It also keeps tax returns and financial statements for the three most recent years. If those records don’t exist, that fact matters.

Try Direct Communication and a Written Demand

A written demand is often the first formal step. Keep the tone factual. Name the specific records or transactions you want. Leave out insults and accusations you can’t support. Anything you write can later be used by either side.

Your right to records depends on your entity type. In a partnership, the partnership must give partners access to its books during ordinary business hours. It may charge reasonable copy costs. In a member-managed LLC, a member may inspect and copy records after making a demand in a record, and the company generally has 10 days after receiving the demand to respond. In a manager-managed LLC, members keep their own inspection rights under Fla. Stat. § 605.0410(3). A member may obtain information if the member seeks it for a purpose material to the member’s interest as a member, makes a demand in a record that describes with reasonable particularity both the information sought and the purpose, and the information sought is directly connected to that purpose. The company generally has 10 days after receiving the demand to respond.

If the company still refuses, the circuit court can act. Under Fla. Stat. § 605.0411, the court may summarily order inspection and copying at the company’s expense. The court must also order the company to pay reasonable costs and attorney fees. The exception is when the company proves it refused in good faith because it had a reasonable basis for doubt about your right.

A written demand sometimes settles the issue without court. It also creates a clear record of what you asked for.

Consider Mediation and Negotiated Separation

Mediation brings a neutral person into the talks. That person helps the owners reach a written deal. Florida courts use it too. Under Fla. Stat. § 44.102, a court must refer a filed civil action for money damages to mediation when one party asks. The requesting party must be willing and able to pay, or the costs must be divided fairly. Some case types are excluded.

Common settlement terms include a negotiated buyout, a revised operating agreement, a payment plan, a new split of duties, or an agreed exit date. Each term should be in writing and signed.

Whether talks can work depends on a few things. Consider how much trust remains, whether the partner will share records, and what the business is worth. No one can predict how negotiations will end. Plan for more than one result.

Legal Claims That May Apply Under Florida Law

A dishonest partner may owe duties the company can enforce. Which duties apply depends on your entity type. Under Fla. Stat. § 620.8404, a partner’s fiduciary duties are limited to loyalty and care. The duty of loyalty includes accounting for profit from partnership business. The duty of care covers grossly negligent or reckless conduct, intentional misconduct, and knowing violations of law.

Members of a member-managed LLC and managers of a manager-managed LLC owe similar duties under Fla. Stat. § 605.04091. They must also act with good faith and fair dealing. A member of a manager-managed LLC generally does not owe these duties solely because of being a member.

Other claims may include fraud, misrepresentation, or breach of the governing documents or a contract. Each claim has its own proof requirements. The documents and facts decide which claims fit.

Timing matters. Florida law sets separate deadlines for bringing a lawsuit on a written contract and on an oral or unwritten contract. Other time limits can apply. Review timing early, not after the deadline is close.

Forcing a Partner Out or Ending the Partnership

Whether a partner can be removed, and how, often depends on what your partnership or operating agreement says, so reviewing those documents is a sensible first step. Start with the buyout, removal, or expulsion terms in your agreement. Many agreements also explain how to value a departing owner’s stake. Valuation fights are common, so get the method in writing.

If owners are deadlocked, the agreement may include a deadlock sale provision. Under Fla. Stat. § 605.0702, that provision can resolve the deadlock if it starts before the court finds grounds for dissolution. The same section lets a member ask the court to dissolve an LLC. Grounds include illegal or fraudulent conduct by those in control, and misappropriation or waste of company assets that causes injury.

A dissolution case is filed in circuit court. Under Fla. Stat. § 605.0703, venue lies in the county where the principal office is or was last located. While the case is pending, the court may appoint a receiver or custodian to protect company assets.

In a dissolution proceeding brought by a member under § 605.0702(1)(b), the company may elect to buy that member’s interest. If the company does not make that election, the other members may. Under Fla. Stat. § 605.0706, the election may be filed within 90 days after the petition, unless the court allows more time. Non-compete terms and tax results also shape any exit. IRS guidance on business structures explains how entity type affects tax treatment.

Common Mistakes to Avoid and When to Bring in Outside Counsel

The biggest mistakes weaken your position. People delete messages, sign new agreements under pressure, confront a partner without a plan, or use company money to cover disputed costs. Keep everything. Pause before signing anything new.

Bring a short packet to a first conversation. Include the governing documents, financial records, a timeline of events, and a list of your goals. Decide whether you want to stay, sell, or exit. Those goals shape every later step.

Some business owners use outside general counsel for ongoing legal issues instead of handling each matter on its own. KEW Legal’s outside general counsel for businesses page explains that model.

Common questions

Can you sue a business partner for fraud in Florida? Possibly. Whether a fraud claim fits depends on your documents, the records, and what the partner did.

How long do I have to sue a business partner? Florida sets time limits under § 95.11. A claim on a contract not in writing generally must start within four years.

Can I force a dishonest partner out? Usually only through a buyout, a removal clause, or a court-ordered remedy. Each path depends on your documents and Florida law.

If a partner’s conduct has you second-guessing the books, you don’t have to work out the next steps alone. Call KEW Legal at 305-990-2300 or send us a message.