The theft should be reported to law enforcement so that there is a record of how it occurred. You may also file a civil lawsuit for embezzlement and breach of fiduciary duty.
By Brad Nakase, Attorney
Email | Call (888) 600-8654
Have a quick question? I answered nearly 1500 FAQs.
For an entrepreneur, there are few experiences worse than realizing someone close to them has taken advantage of their trust and stolen from their business. But this is an unfortunate reality of the business world. In truth, not only in business – it also happens in family and social relationships, and it can be emotionally devastating. What should a business owner do if they suspect their business partner is stealing money from their business? Whether this illegal business conduct is fraud, embezzlement, breach of fiduciary duty, or theft, all are legitimate causes for concern and should be handled immediately. It does no good to ignore the problem and wish it away. This will only make the situation worse.
The first step is to remain calm and rational. It can be easy to allow rash emotions like anger and frustration to take over, but these feelings will only cause more problems and prevent an owner from resolving the situation. Of course, a business owner is justified in feeling angry, frustrated, and betrayed. After all, they have trusted this person and believed they would never stoop so low as to steal from their company. But however justified these emotions are, it is necessary to remain calm in the following weeks and months so that the correct decisions are made in addressing the issue.
A business owner should first ensure the partner is stealing from the business. This can be done by collecting evidence of the misconduct. Simply suspecting someone is stealing from the company is not enough to prove the crime of fraud or embezzlement in court. Many entrepreneurs become convinced that their partner is stealing from them, but when asked, they explain that it is merely a gut feeling or based on their partner’s odd behavior. While the entrepreneur is likely correct in their suspicions, they cannot prove a case using a gut feeling as evidence.
Instead, a business owner must collect actual evidence of stealing in the form of bank statements, credit card statements, bookkeeping records, receipts, inventory accounts, and ATM withdrawals. Therefore, the business owner must maintain detailed business records of inventory, transactions, and cash.
They should put strict controls on the business’ assets and cash. All purchases and expenses should match a receipt with the business logo, name, or address. Any unnecessary signers should be removed from accounts, and access to inventory and cash should be limited to those who need it to operate the business. There should be protections that can prevent a partner from unchecked access to money and assets. For instance, there might be dual keys to a safe, inventory, and the workplace and dual signatures required in accounts. It may also be worthwhile installing security cameras as an added form of protection to observe who is handling inventory and money.
All records should be carefully maintained and copies kept. If a partner steals money or assets from the company, the documents will prove it. Please contact our San Diego business litigation attorney for a free consultation on business disputes.
If a partner has been stealing money or assets from the company, a business owner has several options in the future. These paths may include filing a lawsuit against the partner for breach of fiduciary duties, fraud, or breach of contract. A lawsuit often involves an injunction request against the partner, preventing the partner from accessing company assets or funds. This may also include a request to dissolve the company. If the partner’s misconduct is severe enough, there may be justification to file a criminal complaint against the partner for criminal embezzlement, fraud, or theft.
In severe cases, a business owner may need to use a remedy that allows them to take steps toward securing the company’s cash and assets to prevent future stealing. However, a business owner should be cautious when using self-help remedies because if they are not done correctly, a court may think the owner is harming the business or the partner. Therefore, a business owner should only implement self-help remedies with an attorney who can keep track of each step to avoid potential mistakes.
When a partner is potentially stealing from their company, the company’s Operating Agreement, Bylaws, and state or federal statutes will typically detail what each partner may do in response. They will also let both know the available remedies, including lawsuits, arbitration, and damages. Because the provisions in the Operating Agreement, Bylaws, and statutes can be complicated, it is best to review them with an experienced business dispute attorney. A lawyer experienced in this area can help a business owner review their options and recognize potential pitfalls. It is best to consult an attorney when one suspects a partner stealing. This is because disputes between partners can quickly worsen, so it is best to address the issue as soon as possible. It will do no good to wait months for things to resolve, and it may cost an owner their company.
Have a quick question? We answered nearly 2000 FAQs.
See all blogs: Business | Corporate | Employment Law
Most recent blogs:
Contact our attorney.