How do I charge my business partner for embezzlement?

Embezzlement occurs when a business partner takes money from the company for personal benefit. To make a civil charge for embezzlement against the partner, file a lawsuit for conversion and breach of fiduciary duty.  

Brad Nakase, Attorney

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Business Partner Embezzling, Example

Howard and James have been partners in a business venture called Coffee King for the past ten years. Together, they import coffee beans from around the world to distribute to smaller coffee chains. Recently, the company account has approached James with some disturbing news. It appears that for the past six months, a significant amount has disappeared from the business’ bank account. All evidence points to Howard as the culprit. James is shocked and angry that his long-time business partner has been embezzling from the company. As a firm believer in justice, James wants to charge Howard for his crime. However, he does not know how to proceed with filing charges against his business partner.

How To Prove Criminal or Civil Fraud When a Business Partner Steals from the Company

When two or more individuals form a partnership, their aim is generally to use their combined talents and resources to make a profit. However, things sometimes do not proceed as planned or hoped. When a business partner gets greedy or self-involved, he or she may forget that they owe loyalty to the business and their other partners and begin stealing money or assets from the company. In the event that a partner does so, an individual may pursue a number of legal options.

Indeed, a business owner may have a case for fraud against the misbehaving business partner. Fraud qualifies as both a civil and criminal offense, which means that it harms society as a whole, not only the individual business. Therefore, a business partner’s theft could result in him or her receiving a jail sentence and damages.

In order to prove fraud, it is necessary to demonstrate that the business partner intentionally lied about how they planned to use the money or assets and that one relied on the lie. As a result, the innocent business owner suffered harm as a result of his or her partner’s misbehavior. However, if there is evidence that a business owner knew that his or her partner was untrustworthy has the potential to undermine the fraud case. This is because the owner’s reliance may not be considered reasonable in those circumstances.

Suing a Business Partner for Breach of Fiduciary Duty

A business owner may sue his or her partner for breach of fiduciary duty they know for certain that the individual has been stealing money from the business’ accounts. A fiduciary relationship means that a person is required to act in the other person or business’ interests on matters pertaining to the relationship. Generally, taking money that belongs to the company and using it for personal reasons that do not benefit the business goes beyond the scope of acceptable conduct for a business partner.

Pursuing Embezzlement Charges Against a Business Owner

A business owner may file a criminal complaint against his or her business partner for stealing, or embezzlement. According to FindLaw, embezzlement may be defined as “theft/larceny of assets (money or property” by a person in a position of trust or responsibility over those assets.” It is probable that a business owner formed a business relationship with the partner and designated him as a signer on the business accounts. This would be because the owner trusted the partner to act in the best interests of the company. If the partner then stole money or assets from the business, he or she broke that trust and could be guilty of embezzlement.

How to Make Charges Stick When Suing a Business Partner for Embezzlement

It can be difficult to prove that a business partner stole funds from a business, especially if a business owner never imagined such a scenario arising and therefore did not prepare in advance. If a business is designed as a partnership, in most states all partners generally have the legal right to access and manage business assets. A written partnership agreement has the ability to outline and limit the power partners have to make decisions about accounts and money.

For instance, a partnership agreement has the ability to prevent partners from taking personal loans out of the business’ account. It can also limit partners from making big purchases for mixed business and personal reasons without the permission of other partners. If a business lacks a partnership agreement in writing, it can be difficult to prove that a partner is guilty of fraud. This is because the case can boil down to the owner’s word against the partner’s when it comes to how the fund was intended to be used.

If, however, a company has a written partnership agreement, then the business owner should collect evidence to prove the theft of money or assets. This evidence should include statements and receipts. It is important to ensure that one has a copy of the company’s account books and financial statements so that there is proof of expenses and income. If there is no written partnership agreement that details what qualifies as unauthorized behavior, a business owner must rely on any documentary proof that he or she can find. This documentary evidence should include the intentions of a business owner and the suspect partner, including emails, letters, and texts. Any written evidence like this can help make charges stick in court.

Ending the Business Relationship After a Business Partner Steals from Their Company

A business owner may decide that it is best to cut their losses and end the partnership after learning that his or her business partner has been stealing money or assets from the company. The process of legally ending a partnership is known as dissolution. The process of dissolution varies by state. However, generally the process involves filing dissolution paperwork with the state office that formalized the business entity originally. Once the partnership has been dissolved, the business owner may wish to find another business partner. Alternatively, he or she may wish to proceed as a different entity type, such as a corporation.

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