The Texas limited partnership is one of the most commonly used structures for real estate ventures, family investment vehicles, oil and gas operations, and closely held business arrangements. Its appeal is structural: the general partner manages, the limited partners invest, and both parties benefit from the flexibility and tax treatment that the partnership form provides.

But that structure carries a fundamental asymmetry of power. The general partner controls the business. The limited partners typically do not participate in management, do not have day-to-day visibility into operations, and cannot easily exit their investment. They are, in the most literal sense, dependent on the general partner to act in their interest.

Texas law recognizes that dependency and responds to it with a specific set of legal obligations. The general partner of a Texas limited partnership is a fiduciary — one of the most demanding legal designations in the law. That status imposes duties that cannot be ignored, cannot be casually waived, and cannot be used as a shield for self-dealing. When general partners breach those duties, limited partners have legal remedies.

This post explains what those duties are under Texas law, how Texas courts have defined their scope, what conduct constitutes a breach, and what options limited partners have when the general partner has crossed the line.

The Fiduciary Relationship in a Texas Limited Partnership

Texas courts have long recognized that the general partner of a limited partnership stands in a fiduciary relationship to the limited partners. This is not merely a contractual obligation — it is a status-based duty imposed by law regardless of what the partnership agreement says. The leading Texas Supreme Court decisions on this point, including Riviera Broadcasting Corp. v. Edward J. DeBartolo Corp. and the body of Texas Court of Appeals decisions interpreting the Texas Revised Limited Partnership Act, establish that the general partner's fiduciary obligations are among the most exacting in Texas business law.

The legal foundation is § 153.155 of the Texas Business Organizations Code, which codifies the general partner's duties in a Texas limited partnership. The statute provides that a general partner of a limited partnership has the duties and liabilities of a partner in a general partnership — which means the full suite of fiduciary obligations: the duty of loyalty, the duty of care, the obligation of good faith and fair dealing, and the duty to disclose material information to the limited partners.

These are not abstract principles. They are enforceable obligations that determine whether a general partner's specific conduct — a particular transaction, a compensation decision, a business opportunity, an amendment to the partnership agreement — is legally permissible or actionable.

The Duty of Loyalty

The duty of loyalty is the most fundamental and most frequently litigated fiduciary duty in Texas limited partnership cases. At its core, it requires the general partner to act in the interest of the partnership and the limited partners — not in the general partner's own interest, and not in the interest of any entity related to or controlled by the general partner.

Under § 152.204 of the Texas Business Organizations Code (applicable to general partners through § 153.155), the duty of loyalty requires the general partner to:

• Account to the partnership and hold as trustee any property, profit, or benefit derived from the conduct of partnership business or from use of partnership property, including the appropriation of a partnership opportunity
• Refrain from dealing with the partnership in a manner adverse to the partnership's interests
• Refrain from competing with the partnership

Each of these three obligations generates its own category of breach.

Self-Dealing Transactions

A self-dealing transaction is any transaction in which the general partner stands on both sides — where the general partner (or an entity the general partner controls) has an interest in the counterparty to a transaction with the partnership. Real estate ventures and oil and gas partnerships generate these situations constantly: the general partner's management company charges fees to the partnership; the general partner's affiliated entity sells services or property to the partnership; the general partner's related entity purchases partnership assets at a negotiated price.

These transactions are not automatically improper. Texas law allows self-dealing transactions when they are properly disclosed to the limited partners and when the terms are fair to the partnership. The general partner's obligation is to ensure both conditions are satisfied — full disclosure before the transaction, and arm's-length terms that reflect what an independent third party would pay or charge.

Breaches arise when the general partner fails to disclose a conflict, when the terms are structured to benefit the general partner at the partnership's expense, or when the general partner uses their control of the partnership to approve transactions that no arm's-length counterparty would accept. Texas courts scrutinize these transactions carefully, and the general partner bears the burden of establishing both disclosure and fairness when a limited partner challenges them.

Diversion of Partnership Opportunities

The corporate opportunity doctrine — the principle that a fiduciary cannot take for themselves a business opportunity that belongs to the entity they manage — applies with full force to Texas general partners. A general partner who learns of an investment opportunity, a property acquisition, a contract, or a business venture in the course of managing the partnership's affairs cannot simply decide to pursue it personally or through a separately controlled entity.

Texas courts evaluate opportunity diversion by asking: did the general partner learn of the opportunity in their capacity as general partner? Did the partnership have the financial ability and interest to pursue it? Was the opportunity in the same line of business as the partnership? A general partner who diverts an opportunity meeting these criteria — even if they form a new entity to capture it and structure the transaction so the partnership never has a formal chance to participate — has breached the duty of loyalty.

In real estate limited partnerships, this arises when the general partner acquires adjacent or related properties personally rather than through the partnership. In oil and gas partnerships, it arises when the general partner's separate entity takes a working interest in related leases that the partnership should have been offered. In operating businesses, it arises when the general partner redirects customer relationships, supplier contracts, or key employees to a competing enterprise.

Competition with the Partnership

A general partner who is actively competing with the partnership — operating a business that directly competes with the partnership's activities, soliciting the partnership's customers or clients, or diverting the partnership's business to a competing entity — is in per se breach of the duty of loyalty. This duty applies regardless of what the partnership agreement says unless competition is expressly and specifically authorized.

Texas courts have found competition-based loyalty breaches in situations where the general partner: operated a side business serving the same market as the partnership while managing the partnership's affairs; redirected new business opportunities to a separately owned company; and used the general partner position to learn competitive intelligence about the partnership's customers and then solicited those customers for a personal venture.

The Duty of Care

The duty of care requires the general partner to act with the care and skill that a person in a like position would reasonably exercise under similar circumstances. Under § 152.205 of the Texas Business Organizations Code, a general partner fulfills the duty of care by acting in good faith, in a manner the general partner reasonably believes to be in the best interest of the partnership, and with the care of a person in a like position who acts in good faith and in a manner the partner reasonably believes to be in the best interest of the partnership.

The duty of care is less about specific transactions and more about the quality of the general partner's management decision-making. Breaches arise when the general partner:

• Makes business decisions without conducting reasonable investigation or due diligence — investing partnership funds in a venture without analyzing the risks, entering contracts without reviewing the terms, or making major capital decisions based on inadequate information
• Fails to maintain adequate records and financial controls — allowing partnership funds to be commingled with the general partner's personal funds, failing to keep accurate books and records, or operating the partnership without the basic accounting controls that would protect against fraud or misappropriation
• Ignores material risks that a reasonably prudent manager would have identified and addressed — allowing partnership assets to deteriorate, failing to maintain insurance, or neglecting compliance obligations that expose the partnership to liability
• Delegates decision-making authority to subordinates without adequate supervision — particularly where those subordinates have their own conflicts of interest or where the delegation results in the abandonment of the general partner's management responsibilities

The duty of care is not a standard of perfection. Texas courts apply the business judgment rule to protect general partners from liability for business decisions that turn out badly, as long as the decision-making process was reasonable and the general partner acted in good faith. But the business judgment rule is a shield for honest mistakes in the exercise of reasonable judgment — not a defense for reckless management, neglect, or decisions made in the face of obvious conflicts.

The Obligation of Good Faith and Fair Dealing

In addition to the duties of loyalty and care, § 152.204(b) of the Texas Business Organizations Code imposes an obligation of good faith and fair dealing on general partners. This obligation operates as a gap-filler: even in situations where no specific transaction-based duty is triggered, the general partner must exercise their authority in a manner that is honest, fair, and consistent with the reasonable expectations of the limited partners.

The good faith obligation has particular relevance in three areas:

Exercise of Discretionary Authority

General partners typically have broad discretionary authority under the partnership agreement — authority to make distributions, to retain earnings, to approve transactions, to set management fees, and to make a wide range of operational decisions. The good faith obligation requires that this discretionary authority be exercised for the benefit of the partnership, not as a vehicle for advancing the general partner's personal interests at the limited partners' expense.

A general partner who exercises discretion — for example, the discretion to set the timing and amount of distributions — in a manner designed to benefit themselves (perhaps by timing distributions to coincide with tax benefits to the general partner, or by withholding distributions to manufacture a pretext for valuing the limited partners' interests at a depressed figure) is acting in bad faith even if the partnership agreement technically authorizes the decision.

Information and Transparency

Good faith requires the general partner to be transparent with limited partners about the partnership's financial condition, material transactions, and significant developments. A general partner who withholds material information — who fails to disclose that the partnership is in financial distress while simultaneously soliciting additional capital contributions, who conceals the existence of a related-party transaction, or who misrepresents the partnership's performance to induce limited partners to forego their distribution rights — is acting in bad faith regardless of whether a specific disclosure duty is triggered by statute or agreement.

Conflict Resolution

When a conflict arises between the general partner's personal interests and the partnership's interests, good faith requires the general partner to resolve that conflict in favor of the partnership — or, at minimum, to fully disclose the conflict and give the limited partners the information they need to protect their own interests. A general partner who conceals a conflict, minimizes its significance, or structures a transaction to take advantage of it without disclosure is in breach of the good faith obligation.

The Duty to Account and Disclose

Texas general partners have both a duty to account for partnership funds and property and a duty to disclose material information to limited partners. Under § 153.551 of the Texas Business Organizations Code, limited partners have the right to inspect and copy partnership records — including financial statements, tax returns, books of account, and records of major transactions — for a proper purpose. The general partner's obligation to maintain accurate records and to make them accessible is both a statutory requirement and a component of the fiduciary duty.

The accounting obligation has particular significance in Texas limited partnership disputes because it is frequently where the evidence of breach is most clearly found. General partners who have engaged in self-dealing, diverted opportunities, or mismanaged partnership funds almost always reflect those activities in the partnership's financial records — either through entries that reveal the improper transactions or through omissions and misclassifications designed to conceal them.

When limited partners suspect misconduct, the inspection of partnership records is typically the first legal tool deployed. A properly structured demand under § 153.551, combined with a forensic accounting analysis of what those records reveal, is often the foundation for establishing both the existence of a breach and the measure of damages.

General partners who resist legitimate record inspections — who stonewall requests, produce incomplete records, claim that records do not exist, or impose unreasonable conditions on access — are both violating the statutory right and generating evidence of concealment that supports the underlying breach of fiduciary duty claim.

Can Partnership Agreement Provisions Modify or Eliminate These Duties?

This is one of the most practically important questions in Texas limited partnership law, and the answer requires careful analysis.

Under § 152.002 of the Texas Business Organizations Code, the partners in a Texas partnership have significant flexibility to modify the default rules governing their relationship through the partnership agreement. The statute permits the agreement to expand or restrict the scope of a partner's duties, to set the standards for evaluating conduct, and to identify specific categories of conduct that do not constitute a breach.

However, the Texas Business Organizations Code places firm limits on what modifications are permissible. Partnership agreements cannot:

• Eliminate the duty of loyalty entirely
• Authorize conduct that constitutes willful misconduct or knowing violation of law
• Eliminate the obligation of good faith and fair dealing
• Restrict the right of a partner to information that is needed to protect their interests
• Eliminate the general partner's liability for acts or omissions constituting fraud, willful misconduct, or gross negligence

What partnership agreements can do is narrow the scope of the duties — specifying that certain categories of transactions are pre-approved, that certain conflicts of interest are disclosed and consented to, or that certain business decisions are within the general partner's sole discretion. These provisions are enforceable, but they must be specific. Broad boilerplate language purporting to waive all fiduciary duties or to give the general partner unlimited discretion is disfavored by Texas courts and may not be enforced as written.

The practical lesson: limited partners should never assume that the partnership agreement eliminates the general partner's fiduciary duties. A thorough analysis of the specific agreement provisions — what they authorize, what they restrict, and whether they are enforceable under Texas law — is required before concluding that the general partner's conduct was permissible.

Common Breach Patterns in Texas Limited Partnerships

Real Estate Limited Partnerships

The most frequent Texas limited partnership disputes arise in real estate ventures. The general partner controls property acquisition, development, financing, and eventual disposition. Breach patterns include: acquiring properties personally rather than through the partnership; charging inflated management and construction fees through related entities; selling partnership properties at below-market prices to general partner affiliates; and using the partnership's capital to fund related ventures that benefit the general partner without disclosure.

Valuation disputes are especially common in real estate LP cases. The general partner controls the appraisal process, the broker relationships, and the negotiation of sale terms — all of which create opportunities for self-dealing that are difficult for limited partners to detect without independent expert analysis.

Oil and Gas Limited Partnerships

Texas oil and gas limited partnerships generate breach claims involving: the general partner's failure to disclose the quality or productivity of acreage before the partnership acquired it; the diversion of producing leases or working interests to separately controlled entities; the use of the partnership's geological data and technical analysis to identify opportunities that the general partner then captured personally; and the manipulation of production revenue allocations between the partnership and the general partner's separately owned mineral interests.

Family Limited Partnerships

Family limited partnerships — commonly used for estate planning, asset protection, and multi-generational wealth transfer — generate a distinctive set of breach claims. The general partner is typically a parent or senior family member; the limited partners are typically children, grandchildren, or other relatives. Breaches arise when the general partner uses their control of the FLP to benefit their personal estate at the expense of the limited partners' interests: transferring FLP assets to personally owned entities, making distributions on a preferential basis to the general partner's interest, or managing the FLP's affairs primarily to minimize the general partner's personal tax burden rather than to maximize the limited partners' returns.

Operating Business Limited Partnerships

Some Texas closely held businesses are structured as limited partnerships, with the active owner-operator serving as general partner and passive investors as limited partners. These structures are particularly susceptible to the same freeze-out patterns seen in closely held corporations: the general partner pays themselves excessive management fees and compensation through related entities, denies distributions to limited partners, withholds financial information, and eventually presents a take-it-or-leave-it buyout offer at a depressed price to limited partners who have been financially weakened by years of receiving nothing from their investment.

Remedies Available to Limited Partners

Breach of Fiduciary Duty Damages

The primary remedy for a general partner's breach of fiduciary duty is compensatory damages — the financial harm caused by the breach. In self-dealing cases, this means the difference between what the partnership received and what it would have received in an arm's-length transaction. In opportunity diversion cases, it means the profits the partnership would have earned from the diverted opportunity. In mismanagement cases, it means the loss in partnership value attributable to the general partner's breach of the duty of care.

Texas courts also recognize the availability of disgorgement — requiring the general partner to disgorge profits improperly earned through the breach of fiduciary duty, regardless of whether those profits caused an equivalent loss to the partnership. This is particularly significant in opportunity diversion cases, where the general partner may have profited substantially from a diverted opportunity even though the damages to the partnership are difficult to quantify precisely.

Constructive Trust

Where the general partner has improperly acquired property or assets that rightfully belong to the partnership, Texas courts can impose a constructive trust — a device that treats the improperly acquired assets as if they are held in trust for the partnership and requires their transfer. Constructive trust is especially useful in opportunity diversion cases, where the general partner has acquired assets using information or relationships that belonged to the partnership.

Accounting

Texas limited partners have a right to a formal judicial accounting — a court-supervised process that requires the general partner to produce a complete financial accounting of all partnership transactions, with findings of amounts owed. An accounting is often sought alongside damages claims to establish the full scope of the general partner's misconduct, particularly where the limited partners have been denied access to records and cannot independently calculate the harm.

Removal of the General Partner

In extreme cases, Texas courts can remove a general partner who has engaged in material breaches of fiduciary duty. Under § 11.404 of the Texas Business Organizations Code, a court can order the winding up of the partnership — or appoint a receiver to manage the partnership's affairs — when the general partner's conduct makes continuation of the partnership under their management harmful to the limited partners. Removal is a drastic remedy that Texas courts do not grant lightly, but it is available when the general partner's misconduct is severe and ongoing.

Buyout and Dissolution

Limited partners who have been systematically denied distributions, excluded from information, or harmed by the general partner's self-dealing can seek judicial dissolution of the partnership or, as an alternative, a court-ordered buyout of their limited partnership interest at fair value. Texas courts prefer remedies that preserve viable business operations when possible — but when the general partner's conduct has made continued partnership operation fundamentally unfair to the limited partners, dissolution becomes available.

Statute of Limitations Considerations

Breach of fiduciary duty claims in Texas are subject to a four-year statute of limitations. The limitations period begins to run when the breach occurred — but Texas courts apply the discovery rule in fiduciary duty cases, meaning that the limitations period may be tolled until the limited partner knew or reasonably should have known of the facts giving rise to the claim.

In practice, the discovery rule is critical in limited partnership disputes because the general partner controls the information. A limited partner who was denied access to accurate financial records, who received misleading financial reports, or who was unaware of the self-dealing transactions that constituted the breach cannot be charged with knowledge they had no reasonable means of obtaining. The fraudulent concealment doctrine provides additional tolling when the general partner actively concealed the breach.

These doctrines require careful factual development. Limited partners who suspect a breach should act promptly — both because the limitations period may be running despite the discovery rule, and because early action preserves the ability to seek interim relief and prevents ongoing harm from continuing.

Why Limited Partners Need Specialized Counsel

Texas limited partnership disputes require counsel who understands both the specific statutory framework of the Texas Business Organizations Code and the business context in which the dispute arises. A general commercial litigator who has not handled these cases regularly will not know where to look for the breach, how to structure the inspection demand, how to build the accounting and valuation analysis, or how to deploy the full range of remedies that Texas law provides.

The general partner almost always has an information advantage: they control the books, the records, the financial accounts, and the narrative of the partnership's history. Effective limited partner representation requires knowing how to neutralize that advantage — through inspection demands, forensic accounting, expert valuation, and aggressive discovery — and how to translate the financial evidence of breach into a compelling legal theory that Texas courts will act on.

Hopkins Centrich and Texas Limited Partnership Disputes

Hopkins Centrich PLLC is AV Preeminent® rated by Martindale-Hubbell in both 2025 and 2026 — the highest peer-reviewed rating in the legal industry. We represent limited partners in Texas limited partnership disputes, including real estate ventures, oil and gas partnerships, family limited partnerships, and operating business structures. Our attorneys bring more than 40 combined years of Texas business dispute experience to these cases.

We approach every limited partnership matter by first establishing the full scope of the general partner's conduct — not just the most obvious breach, but the complete picture of how the general partner has managed the partnership's affairs and whether that management has been consistent with their fiduciary obligations. That analysis informs every subsequent decision: what claims to bring, what remedies to pursue, whether interim relief is appropriate, and whether negotiated resolution is achievable.

We have litigated business disputes through trial in Texas, including cases in Montgomery County, and we have won. Our $32 million verdict in L&S Pro-Line LLC v. Garrett Gagliano — among the top 20 Texas business verdicts of 2021 — demonstrates both our trial capability and the results we achieve for clients who have been harmed by the misconduct of those they trusted to manage their investment.

If you are a limited partner in a Texas limited partnership and you believe the general partner has breached their fiduciary duties — through self-dealing, opportunity diversion, mismanagement, or the systematic denial of your economic rights — call Hopkins Centrich. We will evaluate your situation honestly, explain your legal options, and tell you what a realistic outcome looks like.