What Is It Called When You Steal Money from Your Own Business?

What Is It Called When You Steal Money from Your Own Business?

The Ways a Partner May Steal from a Company and How to Handle It

When a business owner learns that his or her own partner has been stealing from their company, it can be a very difficult and distressing thing to process. If it proves to be true, then the partner is breaking the law and can be taken to court. Still, it is a very emotional experience for an entrepreneur to discover that their trusted associate has been taking money or assets from their shared company. Any time someone takes something of value from the business for personal gain, it is considered stealing. In fact, there are several specific kinds of stealing that a person can be guilty of.

Physical Theft and Intellectual Property Theft

Physical theft is when a partner takes cash or physical items from the company without permission and uses those things for his or her personal benefit. Intellectual theft is when an individual takes or uses trade secrets and ideas without approval, and their use is not in the best interest of the company.

Fraud

Fraud is when an individual argues that they are using money or assets on behalf of the business, but they are instead using these things for personal reasons or otherwise diverting them.

Fraud is not only a civil offense, but also a criminal one. Individuals who commit fraud face jail time in addition to paying damages. In order to prove a case of fraud, the business owner must prove that their partner lied, and the owner trusted and relied upon this lie. As a result, he or she suffered harm or damages from the lie. If, however, it is shown that the business partner had been untrustworthy in the past, and that the business owner was aware of this fact, then this can undermine the fraud case. This is because it would not be considered reasonable that the owner relied on the partner’s word.

Embezzlement

Embezzlement is essentially theft, but it is committed by someone who has power over the money or assets that are stolen or misused. Embezzlement often happens when a partner is listed as a signatory on a financial account. The term embezzlement refers to many situations, which might include a partner diverting company funds to their own personal account or a cashier taking money from the company register. Most laws concerning embezzlement are state laws. Usually, to prove an embezzlement case, it must be shown that the individual had access to the money or asset due to their role in the company and the person misused their authority for their own benefit.

Breach of Fiduciary Duty

A breach of fiduciary duty is when a business partner has a relationship with his or her other partner in which they have a duty to act for the benefit of one another and the company. If a business owner discovers that his or her partner has been stealing money from the business’ accounts, he or she may sue over a breach of fiduciary duty. The partner’s actions were not made to benefit the business and were performed outside the scope of the partners’ relationship. Their actions also put the company at risk, which means that any business losses that occurred as a result can be included in civil damages.

If a business owner suspects that his or her partner has stolen from the company, they will have a hard time proving the case. The owner will have to gather compelling evidence that the partner is guilty. It is not advisable to confront the partner in the event they did not actually steal, and the accusation was a mistake based on a missed entry or other minor issue. This kind of false accusation can cause toxicity in the partnership, which can endanger the business.

If the business is a partnership, then the business owner should always consult the written Partnership Agreement, assuming there is one in place. If there is not one in place, then the argument can descend into a case of “he said, she said,” when it comes to how the funds were allowed to be used.

In general, theft occurs according to a pattern. By following this pattern, a business owner can collect the evidence he or she needs. It is therefore recommended that the owner place controls on the company accounts and require receipts for all expenditures. It would also be a good idea to keep track of ATM withdrawals or place security cameras in place where cash may be withdrawn. It would also be wise to keep accurate records of income and expenses.

If a business owner is a victim of theft or fraud, he or she should dissolve the partnership and recover the lost cash or assets. With the help of an attorney, a business partner can decide whether to go to court or otherwise negotiate with the former partner and their lawyer. Sometimes, it may also be possible to claim profit losses or business damages in a civil suit.