What Can I Do If My Business Partner Is Taking Company Funds?

Trust forms the cornerstone of any successful business partnership. However, there are unfortunate instances where this trust is shattered, particularly when a business partner engages in the clandestine act of misappropriating company funds. Discovering such deceit can be disheartening and overwhelming. You may find yourself wondering, “What do I do if I find this out?” We are here to provide clarity and guidance for individuals who are faced with the unsettling realization that their business partner may be stealing from the company.

What Happens If I Find Out My Business Partner is Stealing?

If you discover that your business partner is stealing from the company, it’s crucial to understand the gravity of the situation and the potential legal implications. Your partner’s actions may constitute fraud, theft, or embezzlement, all serious offenses with legal ramifications.

Fraud: Fraud involves deceitful or dishonest conduct carried out with the intent to gain an unfair advantage. Examples of fraud include:

  • Using company credit cards for personal expenses
  • Investing company funds in unauthorized ventures for personal gain
  • Wrongfully using company resources to settle personal debts.

These actions undermine the integrity of the business and can have severe legal consequences.

Theft: Theft refers to the unlawful taking of another person’s property with the intent to permanently deprive them of it. In a business context, theft may occur in some of the following ways:

  • Cash Register Skimming: In a retail setting, an employee or business partner might skim cash from the register before recording sales transactions, pocketing the money for personal use without authorization.
  • Inventory Theft: A business partner might steal inventory items from the company’s stockroom or warehouse, either for personal use or to sell elsewhere for profit, without accounting for the missing items in the company’s records.
  • Intellectual Property Theft: In cases where a business partner unlawfully takes proprietary information, such as trade secrets, patents, or copyrighted materials, for personal gain or to benefit a competitor, it constitutes theft of intellectual property.

Embezzlement: Embezzlement involves the fraudulent appropriation of funds or property entrusted to one’s care but actually owned by someone else. Examples of embezzlement include:

  • Unauthorized Fund Transfers: Transferring company funds to personal accounts without permission.
  • Falsified Expense Reports: Submitting fake or inflated expenses for reimbursement.
  • Ghost Employees: Creating fictitious employees to divert salary payments for personal gain.

Embezzlement often involves a breach of fiduciary duty and can lead to significant financial losses for the company.

If you suspect that your business partner is engaging in any form of financial misconduct, it is crucial to seek legal counsel promptly. Consulting with a knowledgeable business attorney in Los Angeles, such as Stone & Sallus, can provide you with guidance on how to address the situation effectively. They can assist you in understanding your rights, assessing the evidence, and determining the appropriate course of action to protect your interests and the integrity of your business.

By taking swift and decisive action, you can mitigate the damage caused by your partner’s wrongful actions and work towards resolving the situation in a manner that upholds justice and accountability within your business partnership.

Make Sure You Have Sufficient Evidence

Ensuring you have ample evidence is crucial before taking any action against a business partner suspected of misconduct. We assist you in gathering all necessary proof, including monitoring financial accounts and tracking transactions. Requiring receipts for all business expenses, specifically original ones, helps validate expenditure authenticity. Additionally, reviewing any ATM withdrawals made using a business credit card can uncover unauthorized cash withdrawals. Installing cameras in key areas can provide visual evidence of any suspicious activities. By meticulously gathering evidence through these methods and others, you can strengthen your case and ensure that your claims are well-supported when addressing the issue of misappropriated funds with legal professionals.

Taking Legal Action When Your Business Partner is Stealing

When faced with the unsettling discovery of a stealing business partner, it’s essential to understand that every business partnership is distinct. In California, state laws govern all business partnerships, providing a legal framework for addressing such issues. If your partner is found to be misappropriating funds, their actions may constitute fraud, theft, or embezzlement under the law. In navigating these complex legal matters, it’s invaluable to have the expertise of business litigation lawyers like those at Stone & Sallus. Our team is dedicated to guiding you through the legal process, ensuring that your rights are protected and that appropriate action is taken to address the situation effectively. Trust in our experience and knowledge to advocate for your best interests and seek justice in cases of financial misconduct within your partnership.

Proving Your Business Partner is Committing Fraud, Embezzlement and Theft

To prove that your business partner is engaged in fraud, embezzlement, or theft, you must gather compelling evidence. This evidence should leave no room for doubt in the court’s mind regarding the deception. It should demonstrate that your partner knowingly misled you, resulting in financial harm to the business. However, it’s crucial to acknowledge that if your partner has a history of trustworthiness, proving their wrongdoing may be more challenging. In such cases, additional evidence may be necessary to overcome their established reputation. By presenting clear and convincing evidence that meets these criteria, you can strengthen your case and increase the likelihood of legal action being taken against your dishonest business partner.

Pursuing a Civil Claim Based on Breach of Fiduciary Duty

Pursuing a civil claim based on breach of fiduciary duty involves holding your partner accountable for violating their obligation to act in the company’s best interests. To have a viable claim, you must establish a clear link between the loss of funds and your partner’s misconduct. This entails demonstrating that their actions directly led to financial harm to the business. By providing evidence that unequivocally connects their behavior to the financial losses incurred by the company, you can build a strong case for breach of fiduciary duty and seek appropriate legal recourse.

If you’re in the Los Angeles area and suspect your business partner of misappropriating company funds, don’t hesitate to reach out to Stone & Sallus. Contact us today to schedule a consultation and take proactive steps to address any concerns you may have about your partner’s actions.