How Do You Prove a Business Partner is Stealing?

To prove a business partner stealing or committing fraud, you must prove that your business partner knowingly misrepresented a fact as true, you reasonably relied on the lie, and you sustained damages from the lie.

Business Partner Stealing Example

Danielle and Stacy are sisters who inherited a car rental company from their dad called Rent a Ride. Based in Ventura, California, Rent a Ride has become a profitable institution over the last 25 years. It is one of the top spots people go to in the area to rent a high-quality automobile.

When their father, Chuck, retired, the sisters became partners in the business they grew up working in. Danielle has always been a hard worker, but while Stacy might enjoy her salary, she doesn’t work hard and seems to have no interest in the business. Chuck knew this, and when he left the business, he ensured that the new partnership agreement gave Danielle more advantages, such as better stock options and more overall pay.

She is angry when Stacy finds out that Danielle makes more money than her. Soon enough, Danielle begins to suspect that her business partner Stacy is stealing from the business. It begins with small acts. For example, Stacy takes long, indulgent lunches daily on the company credit card. However, Stacy’s actions grow more dramatic. She begins to take company gift cards and give them to friends, and she lies to her sister.

Finally, Danielle realizes Stacy has been taking rental cars home and using them on the weekends, filling up the gas tanks with the company card. Danielle doesn’t want to worry her father, but she knows she must do something. However, when Danielle confronts Stacy, she says she was using the cars for “business purposes” and accuses Danielle of stealing.

Danielle knows her sister is stealing from the family business in various ways, but what should her next move be? Her sister Stacy denies every accusation, so how can Danielle prove that her business partner Stacy is stealing from Rent a Ride?

Unfortunately, some business partners decide to steal from their companies. While business partners committing theft is not a daily occurrence, it is not uncommon. Business partners and entrepreneurs must be able to recognize the signs that a partner is stealing and also know what actions to take. If individuals do not react immediately to embezzlement, fraud, or physical theft, the company will suffer and might go under.

When business partners act quickly and decisively when faced with company theft, they will be able to recover money, property, and damages and move forward in a position of strength.

In this article, we will go over the different types of company theft and explain what business partners should do when faced with thieving business partners. Dealing with a business partner who steals is difficult, but this article should help entrepreneurs understand that they have rights when theft occurs.

What Are the Most Common Types of Business Partner Theft?

Physical Theft

Physical theft occurs when an individual takes cash or items that are company property without company permission. This theft is a disadvantage for the business; normally, the individual who took the money or items did so without authorization and for personal gain.

Intellectual Property Theft

Property theft of the intellectual variety involves individuals stealing ideas. These ideas consist of:

- Trade secrets
- Specific concepts
- Secrets of the trade
- New concepts for products

Intellectual property theft occurs when someone takes an idea that belongs to a company and is not authorized. Additionally, using stolen ideas is not in the business’s best interests.

Embezzlement

Embezzlement occurs when a trusted partner takes company assets without authorization. Since embezzlement often occurs when an individual has access to financial funds, it is often committed by:

- Business partners
- Those in offices of trust
- Those who are responsible for the business’ assets
- Trusted employees, managers, or CEOs

Embezzlement is a common source of business theft, and it is also considered a criminal offense and synonymous with larceny.

Fraud

When a business partner takes money from a company but lies about the purpose of this theft, they commit fraud. For example, a partner might say they need $200 for a business expense but then spend it on themselves or use it for personal expenses. Sometimes, an individual will also take money from one business under the pretext of using it for that company but then direct the money to another business venture.

Fraud is a common offense in business but proving it can be challenging. For example, to show that a partner behaves fraudulently, individuals must be able to show:

That the person who committed fraud lied
That the other person trusted in and relied on the lie
That the lie and the involved theft caused harm to the business, individual or both

One of the most difficult aspects of proving fraud is that if the wrongful partner already had a reputation for being untrustworthy, that fact could hurt the case against them for fraud.

Fraud is a criminal and civil offense, and those who commit fraud risk being incarcerated or having to pay damages.

Breach of Fiduciary Duty

Fiduciary duty, also known as trustee-related duty, focuses on allegiance to the business first.

Fundamentally, fiduciary duty means that the person who assumes the duty pledges to act in a way that will benefit their partner, usually financially.

In business, partners, directors, officers, and workers all pledge to place the business interests first. This pledge is a form of fiduciary duty. For example, when two business partners form a new company and sign a partnership agreement, they create a fiduciary relationship. Therefore, they pledge to act for the benefit of the business first.

One’s fiduciary duty is violated when one person takes money from the company and does not use it for the benefit of the company. A breach also occurs when a partner misappropriates company funds. Finally, when an individual takes money from the business for personal gain, they violate their fiduciary duty by going against the company’s interests.

Breaches of fiduciary duty can also be difficult to prove. First, the evidence must show that theft occurred and that the company’s accounting was accurate.

What Should Business Partners Do If Theft Occurs?

When individuals realize that stealing has occurred at their company, they must take specific actions. Business partners should also remember that theft is a significant accusation, and they should be certain that a partner is stealing before taking action or notifying authorities.

Contact an Experienced Lawyer

An experienced business attorney can help concerned individuals deal with every aspect of a partner’s theft, from identifying the type of theft to deciding whether or not to press charges. In addition, a skilled lawyer can negotiate on the individual’s behalf and deal with the wrongful partner or attorney.

Licensed business attorneys such as California’s Nakase Wade are familiar with the process involved in proving that a partner is stealing and can help with strategy and decision-making. Having a skilled lawyer on one’s side also helps prevent the situation from becoming overwhelming.

While business theft should be dealt with promptly, business partners still must continue running the business. When an attorney is present to help take charge of the situation, the partner does not risk neglecting the company’s interests.

Individuals must discuss their partner’s offenses with their attorneys and identify a path forward. Experienced lawyers know that there are many different paths available to partners, including:

Criminal prosecution
Litigation
Negotiation / mediation

Identify the Type of Theft

Dealing with any type of company theft begins with figuring out the nature of the offense. Once the partner has identified the category of the theft, they can begin to plan out what to do about it. Different offenses require different responses; for example, if a partner commits significant fraud, the other partner or partners must contact the authorities.

One’s attorney can help individuals decide if they should begin the court process and if they need to file criminal charges. Additionally, partners may be able to collect damages in multiple ways, including:

Recovery of stolen goods or funds
Civil financial damages

Whether the errant partner breaches their fiduciary duty, steals money from the company, or both, it is integral for the company to understand their offenses.

Gather the Relevant Proof

Evidence is required to prove that a business partner is stealing. Without evidence, the thieving partner or their lawyer can make excuses based on company mistakes or errors in accounting. So how can evidence be gathered?

Individuals can place controls on their accounts and be strict about using receipts for all spending. However, partners must be more aware of all company spending, from ATM withdrawals to credit card use. Installing a camera at the cash register is also an intelligent move.

Ultimately, there is no case without proof that wrongdoing occurred, and it is never too early to begin collecting and documenting evidence. For example, when a partner believes that one of their business partners is spending excessively on the company card, they should see if they have access to the financial statements and make copies of them.

Pay attention to the evidence that signals that assets have been stolen. These may include:

Receipts
Financial statements
Bills of sales
Camera footage

An experienced attorney can also help individuals gather relevant proof and advise on taking the next steps forward in the case.

Recover Losses

Recovering losses should be started immediately because these actions are extremely time sensitive. While individuals should employ an attorney to help with this process, individuals can also help by identifying their specific losses. Partners should also speak with the other partners—if they exist—to decide how the business can continue to move forward. If there are only two partners and one has committed an offense, then a skilled lawyer is an even more important key to making it through these difficult times.

The key to recovering losses is to have a plan and stick to it. Even if it is a fact that a partner is stealing, recovering losses accurately can be a challenge.

Work On Possibly Dissolving the Partnership

Sometimes, the partners cannot continue with the partnership after the offense is committed or simply do not want to. Financially, sometimes it makes sense to dissolve the partnership and move on with another venture, especially for smaller companies with fewer partners.

When partners seek legal representation for help with dissolving the partnership, they usually do so based on:

Violation of contract
Violations of fiduciary duty
Conflict of interest

Since dissolving any partnership raises many legal issues, speaking with an attorney at this point is essential.

Can a Business Partner Who Steals Be Prosecuted?

If a business partner steals from a business and there is relevant proof, the court can prosecute them. Of course, prosecution depends on the severity and nature of the offense, but business partners who steal often find themselves in legal trouble.

Business partners possess legally binding ownership stakes in the company or business contracts with the other partners. Business partners can also be corporate entities. When it comes to stealing, the nature of the relationship is irrelevant. The relationship of the two parties can be:

Person to business
Business to business
Person to person

Suppose the individual or entity takes the business’ assets and uses them for personal gain, and the company does not authorize the action. In that case, it is considered theft and a serious offense.

What Precautions Should Business Owners Take to Prevent Theft?

Wise attorneys and the authorities would agree that thieves act predictably. However, when individuals discover company theft, they usually do so by noticing a pattern. Therefore, when employees, managers, partners, and CEOs maintain awareness of their surroundings, they have a better chance of discovering that one partner is not behaving correctly.

It is easy to let our daily business take over our lives, especially for business owners and company partners. However, take a little time each day to check on different aspects of the business. For example: does the company credit card reflect some surprising spending? Are sales and profits suddenly skewed from where they normally are? Or, is a certain employee acting strangely, spending lavishly, or not working as hard as usual?

As we have mentioned, there are also specific actions that partners can take to make stealing more difficult, such as monitoring spending and placing controls on accounts. In addition, businesses should feel comfortable using cameras, and partners should track all transactions.

For example, Kevin runs a burger restaurant called Patty’s, and lately, he has noticed a disturbing pattern. Profits dip on Tuesdays, yet the restaurant goes through the same amount of burgers and fries. One of Kevin’s employees, Tasha, always works on Tuesdays.

Kevin installs a camera in the kitchen and at the cash register and quickly discovers two things. One, Tasha eats multiple burgers daily (employees receive one meal per shift and no more) and gives away burgers to friends who visit her. Also, Tasha sometimes forgets to charge customers for their fries.

Kevin’s precautionary work clued him into the situation at hand, and he could deal with the issue promptly. Kevin gave Tasha another chance, but when she didn’t change her behavior, Kevin fired her so the business could recover and succeed.

What Court Proceedings Occur After a Partner Steals?

After a theft occurs, the individual must report the act promptly so it goes on the record. When a partner makes a report, they should include:

How they discovered that theft was occurring
What proof do they have that the theft occurred

Next, law enforcement officials will investigate the issue and attempt to substantiate the claim. Then, the officials will decide how to follow up and the next steps, and then they will let the involved partners know.

Depending on the severity of the offense, the offending partner may be taken into custody and taken to court. Then, the next steps are normally:

The allegation of theft is read to the defendant
The defendant enters their plea
A date for the hearing will be set
The defendant will be allowed to go on bail, or they will be detained; this depends on the nature of the accusation and the investigation’s progress

After these actions, the case will go to trial. The accusing partner and their attorney must provide certain evidence of wrongdoing. All defendants are innocent until proven guilty. If the defendant is found guilty of stealing from the business, they will be sentenced in court.

How Can Individuals Cope with a Business Partner Who Steals?

The news can be emotionally disturbing when an individual learns that their partner is guilty of stealing. Typically, business partners place trust in each other. When partners create a business, they are full of hope for their new venture and respect for each other. However, greed can ruin this positive sentiment. As a result, many entrepreneurs become angry, resentful, depressed, and sometimes jaded regarding future business partnerships.

It will take time to register and get over the shock of a fraudulent partner’s actions, but it will happen. Individuals must allow themselves time to heal, and they might want to speak with a friend, family member, or professional therapist.

Next, the aggrieved individual should contact a licensed business attorney with a track record of success. But, again, the key for wronged partners is to protect themselves and keep the company on track.

Also, partners should consider that they do not yet know how much stealing has taken place. Perhaps the partner took more than is currently visible, or they did not act alone. While every partner hopes the situation will resolve itself quickly and easily, they should prepare for a legal battle.

Partners should dedicate themselves to getting their money, property, or ideas back immediately; that is where an excellent attorney comes in. Whether the partner’s goal is to litigate or negotiate, a trusted attorney is necessary when dealing with company theft.

When Should Individuals Contact a Lawyer?

First, business partners should identify the theft and collect evidence. Then, they should identify the type of theft their partner or associate committed. For partners, knowledge is essential when dealing with a business partner who decides to steal. Business attorneys who have handled similar cases will be able to analyze the circumstances and then present the individual with options for moving forward.

For example, to recover stolen funds, sometimes it is necessary to dissolve the partnership, but this is not always the case.

Individuals can also sometimes receive financial damages when their partner violates their fiduciary duty, steals goods or funds, embezzles from the company, or commits fraud.

A qualified business attorney can help to get to the bottom of cases of partner theft, so the plaintiff can continue to oversee the company. All individuals have different goals depending on the nature of the case. Therefore, the first thing individuals should do is tell their lawyer exactly what they want to happen, why it is justified, and when they would like it to occur.

Nakase Wade: Experts in Dealing with Your Business Disputes

The attorneys at Nakase Wade in California have dealt with numerous cases involving business partners who commit fraud and embezzlement.

Our lawyers will get to work immediately. First, we will help you identify the specific type of theft that occurred. Then, we will collect evidence of the crime and pursue legal action against the business partner.

If your partner steals from the business, you may be entitled to civil and legal damages. Our talented attorneys will quickly build a strong case and work towards the outcome you desire so that you can return your focus to the company.

If your business partner is stealing from the business, there is no time to waste: contact the legal experts at Nakase Wade today for a free consultation.

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