Can My Business Partner Withdraw Funds Without My Consent?

A business partner cannot withdraw the company’s funds for personal use. It is called embezzlement when a business partner withdraws funds for personal use.

Brad Nakase, Attorney

Email  |  Call (888) 600-8654


While it may be bad form for a partner to withdraw money from the business for personal reasons, it is legally not considered wrong. However, if a partner says he is withdrawing money for a business purpose but proceeds to use it for personal reasons, then this qualifies as fraud. Again, though, what really matters is the magnitude, or scale, of the problem. If a partner took some money to buy a nice lunch, it will realistically be hard to find a lawyer who will take the case to court.

The best step for a business owner to take is to create a Partnership Agreement. This is a great way to make sure things don’t get out of hand. If the contract is broken, then the business owner is in a much stronger position to penalize the guilty partner.

Signs Your Business Partner Is Stealing

It is not always easy to determine whether a business partner has been stealing from his or her company, and whether or not they may be designated a thief. It is necessary to study the question from a number of perspectives in order to reach a defensible conclusion. One should be aware that if a partner is taking money out of the business without permission, this is not necessarily stealing, embezzlement, or any other high crime. It would only be illegal if the partner is using that money for personal reasons. Still, there is a catch. The quantity of money taken can help establish whether there has been an actual theft, legally speaking.

Why Does the Amount Matter?

Normal theft as we experience in society is when an individual steals an item or service, whether it is worth $5 or $50. If the thief takes more money, say $5000, then the penalties tend to be more severe.

The business world understands theft slightly differently. A business partner who uses the company credit card at an ATM to buy a sandwich is not stealing. This is because the money in the business belongs to him or her just as much as it does to the other partners. This concept applies to access to credit also. That said, when it comes to defining business theft, it is necessary to take into account the amount of money taken and the purpose for which it was withdrawn.

How Does One Determine Business Theft?

In business law, there is a general understanding that a partner may not harm a company which is a partner of. This concept is called fiduciary responsibility. If Partner A and Partner B are in business together, then Partner A should be able to rely on Partner B not to harm or damage the business, and vice versa. Therefore, it is perfectly acceptable for either partner to take money from the business so long as that withdrawal does not put the business at risk.

For this reason, the amount taken matters. If a partner withdraws $100 and as a result the company cannot pay the monthly rent, then that partner has harmed the business, even over such a small amount. That said, an attorney will be hesitant to pursue a lawsuit over a meager $100. Again, the amount plays a large role. Even when a partner regularly withdraws money without asking permission from his or her colleagues is still not guilty of a breaching his or her fiduciary responsibility.

Now, if money is withdrawn under false pretense, then that is a different matter entirely. If Partner A told Partner B that he needed a check for $500 to cover the repair of his work laptop, but instead he used that money to book a flight to Hawaii, that would be fraud. This kind of expenditure would therefore break the business code. These types of situations are where most legal cases stem from. When a business partner withdraws money and lies that the reason involved the company when it does not, there is an obvious case for legal action. The only issue, again, is the magnitude of the situation. It is very difficult to get an attorney willing to go to court over a small amount of money.

If a partner commits fraud, however, then there is a much greater likelihood of being able to take a business partner to court. Fraud would be the misrepresentation or deception about the use of money taken from the business. Luckily, even if the case is too small for an attorney to accept, there are other methods one may use to handle these situations oneself.

How a Partnership Agreement Protects Against Fiduciary Breaches and Fraud

One of the best things a business partner can do is to set up a Partnership Agreement. This document will define all dealings with money. An owner can set limits, require mutual agreement, and even block discretionary spending. If a partner then breaks a rule included in the Partnership Agreement, there is a breach of contract which is enforceable by law. While it may still be difficult to hire an attorney willing to take the case, the owner of the business may enjoy added rights.

If an owner established a Partnership Agreement that includes financial terms, and his or her partner continually breaks the agreement, then the owner has a few options to consider. He or she may choose to leave the partnership, or they could decide to force the partner into a silent role in the business. It may even be possible to remove a partner who commits serious breaches of the Partnership Agreement. Having this kind of contract in place puts a business owner in a much better position than if he or she did not have one. If a partner refuses to sign this agreement, then this can also be grounds for removal from the partnership.

Please tell us your story:

3 + 1 = ?

See all blogs: Business | Corporate | Employment

What is profit formula and how to calculate profit formula?

A business profit is revenue minus expenses. The profit formula in accounting calculates the net gains or losses incurred by the business for a period by subtracting the total expenses from the total income: Total Income – Total Expenses - Profit

What is invoice reconciliation?

Invoice reconciliation is the process of matching bank statements to incoming and outgoing invoices. The purpose of invoice reconciliation is to confirm that the data entry is correctly matched with every invoice.

What Makes a Verbal Contract Valid

A verbal contract is valid when contractual elements are satisfied, such as evidence of an offer, acceptance of the offer, and consideration which is an exchange of value between the parties.

Marketing Transport Company

The easiest way of growing your list of clients is to schedule a meeting with businesses that do a lot of shipping and introduce your transportation company. Then, engage an internet presence to market your transportation business.

What Can You Do with a Toxic Business Partner?

A bad partnership could lead to profit loss and toxic company culture. The first way of dealing with a toxic business partner is to schedule a meeting to discuss your concerns calmly.

Disruptive Business Model

Disruptive business models are disruptive innovations that bring new business ideas or technology to existing markets. A disruptive business does not fit the profile of a standard business model. Amazon is considered as one of the world's most disruptive companies.

How to Get a Business Loan with Bad Credit

For small business owners with bad credit, the easiest place to get a business loan is with the SBA. Although not easy, entrepreneurs with bad credit can get a small business loan.

How to Get a Small Business Grant

You can get a small business grant from the Small Business Administration. Also, check your local government for small business stimulus grants.

Pros and Cons of Etsy

Etsy Pro: Your products are given a large audience, and you easily sell your merchandise. Etsy Cons: You can only sell handmade or vintage merchandise, and there are many competitors.

What is a Breach of Contract in California?

A breach of contract in California arose when a party to a contract failed to achieve a legal duty the contract created. When a party to a contract fails to fulfill the terms of a binding contract, they are liable for damages for breaching the contract.

Business Equipment Leasing Pros and Cons

One advantage of equipment leasing is that you don’t need to come up with all the cash to buy the equipment. One disadvantage of equipment leasing is higher overall costs than outright purchasing the equipment.


The main difference between an LLC and a DBA is that an LLC is a business entity, and a DBA is a registered fictitious business name. Sole proprietors, general partnerships, and LLC can register for a DBA.

What is an LLC and how does it work

An LLC is a business entity that protects the owners with limited liability protection. An LLC also offers pass-through taxation, which means the company’s profits and losses pass through to the owner’s personal tax level.

What Is a Disregarded Entity?

A “disregarded entity” refers to an entity with one owner and not organized as an entity such as a corporation, LLC, or partnership. For federal tax purposes, the disregarded entity and the owner, who is a natural person, are not treated separate.

California Breach of Fiduciary Duty

A fiduciary is a professional person who owes a legal and ethical responsibility to another person. Examples of people with fiduciary duties are lawyers, financial advisors, corporate officers, corporate directors, etc. A breach of fiduciary duty occurs when the professional person fails to do what was legally and ethically required of them.

List of 12 Biggest Business Startup Costs

It is a good idea for every entrepreneur to consider the costs associated with starting their business. Financing is stressful, but estimating startup costs goes a long way to ensuring a business succeeds.

Is it legal to sell homemade food in California?

California is one of the only states to allow individuals to sell homemade meals, including meals that contain meat. So long as you have California required permits and licenses, it is legal to sell homemade food in California.

10 Tips on How To Start A Food Truck Business

Running a food truck business is an exciting and trendy opportunity for any entrepreneur with a passion for food. If a business owner chooses the right financing options and follows the above tips, then he or she has every chance of success.

What is a demand letter?

A demand letter is a letter that is commonly written by a lawyer on behalf of a client setting forth facts supporting a demand for money. A demand letter is usually the first step in resolving a dispute between two opposing parties.

What is working capital cycles?

In business, a Working Capital Cycle is the period that a company waits to receive payment to create available cash. A long cycle means tying up capital for a longer time without earning a return. Short cycles allow your business to free up cash faster.

What Happens When Business Partners Disagree?

Before going nuclear, when business partners disagree, the partners should talk about how to move forward. If talking fails, the partners may discuss a buy-out. However, if there is wrongdoing by one business partner, a lawsuit may be an option.

Bank Statement Business Loans

A business bank statement loan lender relies only on the company’s bank statements to qualify the borrower.

How to Prove a Verbal Contract

To prove a verbal contract is by getting witnesses to testify that the agreement was made. Also, proving a contract existed can be supported by documents such as receipts, invoices, delivery, statements, text messages, and emails.

What are business performance metrics, and why it is important?

Business performance metrics is a quantifiable measured value that shows the company’s progress and growth. Business metrics track the business progress and performance. A quantifiable measurement may include customers, revenue, and profits.

Is Sabotaging a Business Illegal?

Yes, sabotaging a business is illegal regardless of who is saboteur, e.g., business partner, competitor, family member, or customer.

See all blog: Business | Corporate | Employment

© Copyright | Nakase Law Firm (2019)