You had your reasons for going into business with your partner. Maybe they were a longtime friend, or someone you recently met who shared your passion or your ability. Maybe you formed a partnership with a family member, or a colleague with whom you’d worked for years.  No matter who your partner is or how well you thought you knew them, people are remarkable in their ability to hide illicit thoughts, activities, and bad acts, even from those who think they know them well. If it turns out that your business partner has been breaking the law and has been convicted of a crime, it can have a significant impact on you personally as well as on your business. Here’s what you need to know.

Your first step should be to consult with an experienced business attorney who will be able to assess the potential impact of your partner’s conviction. Some crimes are certainly more serious and damaging than others. Your attorney will want to know whether you knew about the criminal activity, whether the activity was specific to your business or unrelated, and to what extent the conviction was publicized. They will also want to review your partnership documents to determine the kind of partnership that you had, and whether it was a limited liability partnership, a corporation, or an informal arrangement. The answer to these questions will be very important.

Your best scenario will be if you have a partnership agreement that specifies your ability to dissociate or expel your partner based on an event or a unanimous vote by other partners. Most well-crafted agreements will contain what is known as an expulsion clause that allows for the removal of a partner for bad behavior. Whether that exists or not, your partner’s role and responsibility means that they have a fiduciary duty to act in the best interest of the business, and their conviction likely violates that duty. Your attorney will help you determine whether your partner’s actions affect your business’ reputation, your ability to continue operating, and what liability you and the business may have as a result of their bad behavior.

For guidance on a specific scenario, contact our office directly to set up a time to discuss your situation and best steps.