“Fiduciary duty” is the phrase business owners reach for when a co-owner has done something that feels like betrayal. A partner starts a competing venture. A manager signs a deal with a company his brother in law owns. A majority member calls a vote nobody knew about and the minority owner finds out afterward.
In Texas, whether any of that is a breach of fiduciary duty depends far less on how unfair it feels than on two questions. What kind of entity did you form? And what does your governing document say? Those two answers can produce completely different outcomes on identical facts, and most owners do not learn which answer applies to them until they are already in a dispute.
Here is how Texas law actually allocates these duties, what the statutes say in their own words, and what a Texas Business Court opinion from September 2026 shows about how far a company agreement can go.
Partners Get Fiduciary Duties by Statute
If you are in a general partnership, the duties come from the Texas Business Organizations Code, not from a handshake. Section 152.204, titled “General Standards of Partner’s Conduct,” sets the baseline. It provides that a partner owes to the partnership, the other partners, and a transferee of a deceased partner’s partnership interest as designated in Section 152.406(a)(2), both “a duty of loyalty” and “a duty of care.”
Subsection (b) adds a standard of conduct. A partner must discharge those duties and exercise any rights and powers in the conduct or winding up of the partnership business “in good faith” and “in a manner the partner reasonably believes to be in the best interest of the partnership.”
Then come two subsections that surprise people, and they cut in the opposite direction. Subsection (c) states that a partner “does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest.” Subsection (d) states that a partner, in that capacity, “is not a trustee and is not held to the standards of a trustee.”
Read together, the statute says a partner owes real duties but is not held to the near absolute selflessness people associate with the word fiduciary. Self interest alone is not a breach. Something more is required.
What the Duty of Loyalty Actually Requires
Section 152.205 defines the duty of loyalty by listing what it includes. A partner’s duty of loyalty includes “accounting to and holding for the partnership property, profit, or benefit derived by the partner” either “in the conduct and winding up of the partnership business” or “from use by the partner of partnership property.” It includes “refraining from dealing with the partnership on behalf of a person who has an interest adverse to the partnership.” And it includes “refraining from competing or dealing with the partnership in a manner adverse to the partnership.”
Those three items map onto the disputes that actually arrive at a litigator’s desk. The first covers a partner who takes a profit the partnership should have received, or who uses partnership equipment, data, or customer relationships for a separate venture. The second covers the partner sitting on both sides of a transaction. The third covers the partner who starts a competing company while still inside the tent.
Notice what the list does not say. It does not say a partner can never have another business. It says a partner cannot compete or deal with the partnership in a manner adverse to it. The distinction is where these cases are won and lost, and it is usually resolved by what the partnership agreement permits.
The Duty of Care Is Lower Than Most Owners Expect
Section 152.206 sets the standard of care. A partner’s duty of care is “to act in the conduct and winding up of the partnership business with the care an ordinarily prudent person would exercise in similar circumstances.”
Two more subsections then narrow it considerably. “An error in judgment does not by itself constitute a breach of the duty of care.” And a partner “is presumed to satisfy the duty of care if the partner acts on an informed basis and in compliance with Section 152.204(b).”
This is the provision that defeats a great many claims brought by frustrated owners. A decision that turned out badly is not a breach. A decision made without gathering the information a prudent person would gather is a different matter. If you are the one making decisions, the practical takeaway is to document what you looked at before you decided, because the presumption runs to the partner who acted on an informed basis.
Limited Liability Companies Are Different, and Section 101.401 Is Why
Here is the provision that reorders everything for the majority of North Texas businesses, since most of them are limited liability companies rather than general partnerships.
Section 101.401 is titled “Expansion, Restriction, or Elimination of Duties and Liabilities.” It is a single sentence: “The company agreement of a limited liability company may expand, restrict, or eliminate any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person has to the company or to a member or manager of the company.” The published text carries an amendment note recording a change in the 2025 legislative session, effective May 14, 2025.
Read that sentence slowly. Not limit. Eliminate. In a Texas limited liability company, the company agreement is the first place to look for the duties owners owe each other, and the statute is the backstop only to the extent the agreement leaves one.
Which means the single most consequential document in your business may be a file nobody has opened since formation. If your company agreement came out of a template in 2016 and you have never read Article V, you do not currently know what duties your manager owes you.
A Business Court Ruling Shows How Far That Goes
In Hinds v. Sandman Offshore, cited as 2026 Tex. Bus. 63, Cause No. 26-BC11A-0053, the Eleventh Division of the Texas Business Court issued a memorandum opinion and order on September 14, 2026 that applied Section 101.401 at the pleading stage.
The company agreement contained a provision the court treated as the operative one. It said that “[e]xcept for such duties as may be expressly set forth in this Agreement, a Manager shall not be subject to any duties” and specified “(including fiduciary duties) in the management of the Company.”
The court held three things worth an owner’s attention.
First, on member to member duties, the court held that members of limited liability companies do not owe formal fiduciary duties to fellow members simply because of their relationship as co-members, quoting Bertucci v. Watkins, 709 S.W.3d 534 (Tex. 2025). Combined with Section 101.401, that meant the defendant owed no fiduciary duty merely by virtue of his membership interest. Holding a membership interest, by itself, does not make someone your fiduciary.
Second, on manager duties, the court held the agreement’s limiting provision applied and exposed the manager to only the limited, express duties the agreement set out. Claims based solely on the plaintiff’s removal and expulsion, or on the absence of notice of those actions, were legally baseless.
Third, the claims that survived did so because of the exception written into the clause itself. Because the provision preserved duties expressly set forth in the agreement, including a carve-out for willful misconduct, the claims alleging willful misconduct in managing the company survived dismissal.
That is the whole lesson in one sentence. The carve-outs in your exculpatory clause define the only claims anyone can bring against your manager. Everything outside them was eliminated by contract.
One caution. This was a ruling under Texas Rule of Civil Procedure 91a, which tests whether a claim has a basis in law on the pleadings. The court did not decide whether willful misconduct actually occurred, and it expressly declined to treat the company’s own characterization of the plaintiff’s outside work as established. The opinion is also a trial court decision, persuasive rather than binding on other divisions.
A Long Relationship Does Not Create an Informal Duty
Owners in this position often argue that even if the paperwork says one thing, decades of trust say another. Texas courts hear that argument regularly and it usually loses.
In Hinds, the plaintiff pleaded a business association of roughly sixteen years. The court held those facts precluded the creation of an informal fiduciary duty, reasoning that no additional duties would be imposed where the parties had reduced their obligations to writing.
The authority behind that is recent and specific. Pitts v. Rivas, 709 S.W.3d 517 (Tex. 2025) recognizes that an informal fiduciary relationship can arise from personal relationships of special trust and confidence, while also stating that the freedom of contract includes the freedom to define the nature and scope of a business relationship. Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005) holds that arm’s length transactions entered into for the parties’ mutual benefit are not enough on their own. The Hinds court also noted that a power imbalance between the parties creates no fiduciary duty by itself.
If you intend trust to be legally enforceable, it has to be in the agreement. Years of good faith do not substitute for a clause.
Procedure in the Agreement Often Decides the Case
The most useful part of the Hinds opinion for an owner is not the duty analysis. It is how much turned on plain mechanics.
Expulsion of a member required cause and a decision by majority interest. A separate provision made a majority interest determination that a member was engaged in conflicting business activity sufficient to constitute cause. Another provision allowed action to be taken “without a meeting, without prior notice, and without a vote” by written consent of the requisite majority. A further provision permitted removal of a manager with or without cause, which the plaintiff conceded.
Against that structure, the complaints about being removed without notice had nowhere to land. The one contract claim that survived was the refusal to hold a special meeting the plaintiff had requested under a provision requiring notice to each member at least ten days before the meeting.
So the claim that lived was procedural, and so were the claims that died. Notice requirements, written consent provisions, and voting thresholds are not boilerplate. In an ownership dispute they are frequently the entire case.
Your Information Rights Are Statutory and They Are the Practical First Step
Before any of this becomes litigation, most owners need the same thing: the documents. Texas gives limited liability company owners a statutory route, and it is a far better first move than a demand letter.
Section 101.502, titled “Right to Examine Records,” provides that a member or an assignee of a membership interest, “on written demand stating a proper purpose,” is entitled to examine and copy at a reasonable time at the company’s principal office, or another approved location, “any records of the limited liability company, whether in written or other tangible form, which are reasonably related to and appropriate to examine and copy for that proper purpose.” The examination may be conducted through an agent, accountant, or attorney, who is then subject to the same obligations regarding the records.
Subsection (c) goes further and requires the company, on written request, to provide copies without charge of the certificate of formation and any amendments, the company agreement and any amendments if it is in writing, and the tax returns described by Section 101.501(a)(2). Subsection (d) says the demand must go to the person designated in the company agreement to receive it, or, if there is no designation, to a manager or managing member at the company’s principal office in the United States.
Section 101.501, “Supplemental Records Required for Limited Liability Companies,” is what makes the demand worth making. It requires the company to keep, or to make available within five days of a written request, a current list stating each member’s percentage or other interest, copies of the company’s federal, state, and local tax information or income tax returns “for each of the six preceding tax years,” the certificate of formation, the written company agreement, executed powers of attorney, documents establishing any class or group of members, and a written statement of contributions, including the amount of each cash contribution, the agreed value of other contributions, the dates of any additional contributions, and the date each member became a member.
Section 3.151, “Books and Records for All Filing Entities,” sits underneath both and requires every filing entity to keep books and records of accounts, minutes of proceedings, and a current record of the name and mailing address of each owner or member. Note subsection (c), which provides that the minutes requirement does not apply to a limited partnership or a limited liability company except to the extent its governing documents require it.
Two practical points follow. Write the demand, state the purpose, and send it to the right person, because the statute conditions the right on all three. And if you are the one who runs the company, understand that the six year tax return list and the capital contribution statement are documents a member can compel. They should be accurate before anyone asks.
What These Disputes Usually Turn On
Across partnership and ownership cases, the same handful of questions decide the outcome.
- Is the entity a partnership, where Sections 152.204 through 152.206 supply the duties, or a limited liability company, where Section 101.401 lets the agreement rewrite them?
- What does the governing document say about fiduciary duties, and what does it carve out?
- Is the complaint about loyalty, which the statute defines by category, or about care, where an error in judgment is not by itself a breach?
- Was the required procedure followed? Notice, written consent, and voting thresholds frequently decide the case before the merits are reached.
- What do the records show, and have they been requested in writing in a way that triggers the statutory obligation?
What to Do Before the Relationship Breaks
The owners who come out of these disputes well are almost always the ones who read their documents while everyone was still getting along.
Pull the company agreement or partnership agreement and read the article on management and the article on duties. Write down, in one page, who can act without a vote, what counts as cause, and how much notice a meeting requires. If the exculpatory clause eliminates duties you assumed existed, that is a drafting decision you can still revisit by amendment while relations are good. Confirm the buy-sell terms actually describe a process you would accept. And make sure the records the statute requires are current, because the first thing anyone will ask for is the list of interests and the tax returns.
Co-owner disputes in Texas are decided by documents written years before the argument. If you want to know what your agreement actually says about the duties your partners and managers owe you, or you are already in a dispute over a vote, a removal, or a competing venture, you can read more about this work on our partnership disputes page.
Related reading
- What Happens When a Texas Business Partnership Breaks Down?
- What Should Be in a Texas LLC Company Agreement?
- Can You Sue Your Business Partner Personally in Texas? What a New Business Court Ruling Says
About the author: Hastings L. Hanshaw is a founding partner of Hanshaw Kennedy Hafen in Frisco, Texas. He is a business litigation and trial lawyer who has tried cases in state and federal courts across Texas.