Suing a business partner who stole money from a joint account and emptied the bank account.

A business partner who stole money from a bank account may be liable for embezzlement and ground to sue. You may sue a business partner for breach of fiduciary duty for stealing emptying a joint account.

Example of Embezzlement: Stealing Money from Company

Brody and Chad run a bar in downtown San Diego, California, called Zingers. The two partners are lifelong friends, but they have grown apart as of late. However, Zingers is still a profitable entity, and both partners work hard seven days a week to support their families.

Brody has always been the acting bar manager because he loves interacting with customers and helping bartenders pour drinks. On the other hand, Chad is the numbers guy and is often in the back office with a spreadsheet.

Chad is also responsible for handling the bar’s assets and liabilities. He oversees the credit accounts Zingers uses to order supplies, alcohol, and food, and each week, Chad goes to the local bank to deposit cash from the bar’s sales into the company account.

Brody trusts Chad, but he also knows that Chad has been dealing with personal problems in his marriage. Chad hasn’t worked as hard, but Brody chalked Chad’s lackadaisical attitude to his problems. Chad is also a gambler and has admitted to Brody that his gambling debts have piled up. So, when Brody notices that the bar’s profits seem off, he is suspicious.

However, Brody knows he cannot accuse Chad of stealing based on mere suspicion. Instead, Brody gives himself a few weeks to collect evidence. He collects ATM deposit slips, bank statements, and bar receipts, noticing many inconsistencies. Then, he finds one of Chad’s deposit slips that he mistakenly left on the bar. Chad deposited a large amount of cash into his account last week when he was supposed to take care of the bar’s banking.

Brody has enough evidence to confront his business partner and friend about his dishonesty. While he knows the confrontation will be difficult, the business will fall apart if he does not act, and Brody has a wife and two kids to worry about.

Brody confronts Chad with his suspicions and evidence. Although Chad initially denies Brody’s claims, he gives in. Chad is apologetic, and Brody decides not to contact the authorities. However, he does contact an experienced attorney for help. Brody knows that he needs a lawyer on his side to make sure that Chad pays damages: he must give back everything he has taken from the bar and then some.

Ultimately, although Brody decides not to press charges against Chad, he also decides he cannot trust his old friend anymore. With help from his attorney, Brody successfully removes Chad from the company and continues to run Zinger’s successfully on his own. When the time is right, Brody will hire a new partner or sell the business to spend more time with his family. Whatever he decides, Brody has to figure out what happens when a partner steals from the business. Brody contacts Nakase Wade business litigation attorney in San Diego for a free consultation.

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When a Partner Steals from the Company, What Should Be Done?

When a business partner decides to steal from their own business, they often ruin the company. They also ruin relationships with partners and co-workers, all in pursuit of their greedy goals. While it may surprise people to learn that business partners steal, these acts occur across all industries and at all different types of companies.

Business partners exploit companies in various ways, and they are all built on dishonesty and narcissism. Often, partners who steal think that the money they take is “theirs anyway,” and they see no problem in the wrongful acts they commit. Stealing can take many forms, including:

Fraud
Embezzlement
Violations of fiduciary duties
Straightforward theft
Diversion of funds

Finding out a trusted partner is stealing can be difficult emotionally, and sometimes company partners try to ignore their partner’s illicit acts in hopes that they will go away. However emotional this time can be, business partners who discover that embezzlement or fraud is occurring at their companies must pick up and confront the behavior head-on.

When business partners discover theft, they should take a deep breath and remain calm. While it is normal for partners to become angry when someone takes money from company accounts or business assets for personal use, animosity will not solve the problem.

Instead, the best reaction is to stay calm and decide the best way to approach the problem. The person who steals is no longer a trusted part of the business. They can no longer be relied on because they placed their goals ahead of the business and risked damaging the company for their own sake.

Contact Experts and Locate Evidence

To deal with company theft quickly and thoroughly, worried partners should contact experts in the field, such as attorneys and forensic accountants.

Forensic accountants are certified public accountants focusing on financial documents, accounts, and records. For example, when a forensic accountant finds evidence of theft in the company’s books, this evidence can be used in a court of law.

When stealing occurs at any level, it also makes sense to get in touch with a professional attorney with proven experience with such matters. A skilled business lawyer will be with you every step as they help build your case and seek out the damages owed.

Stealing is not an accusation that should be made lightly or not taken seriously. If one partner accuses the other of stealing, chances are that whatever relationship they had will suffer. Dealing with a thief can be emotionally draining, and the situation can hinder productivity and make normal basic tasks difficult.

Also, if the accusation of stealing is proven wrong, the future of the business could suffer. Therefore, before accusing a business partner of committing theft, ensure that the information is credible and that proof exists.

Once partners overcome the stress of the situation, they must think rationally. For example, if there are multiple partners, they should hold a meeting, but the partners should not invite the problematic partner. One of the first courses of action is to collect evidence of the theft so that when confronting the partner, there is proof of their actions to fall back on.

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 the following:

- Trade secrets
- Specific, individualistic concepts
- 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 partner takes company assets without authorization. Since embezzlement often occurs when a trusted individual has access to financial funds, it is often committed by:

Employees, managers, or CEOs whom the company trusts
Those who are responsible for the business’ assets
Trusted business partners

An embezzlement is a common form of business theft. It is also considered a criminal offense 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 $500 for a business expense but then spend it on themselves.

Sometimes, an individual will also take money from one business under the pretext of using it for that company but then direct it to another business venture of their own; this is also fraud.

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

That the individual who committed fraud lied
That the other individual relied on the lie
That the lie and the theft caused damage 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.

Breach of Fiduciary Duty

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

One way a business partner can violate their fiduciary duty is by taking money from the company but not using 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.

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.

Breaches of fiduciary duty can be difficult to prove. First, the evidence must show that theft occurred and that the company’s accounting was accurate. Then, the partner must show that their partner went against the company for personal gain. Again, evidence is instrumental in cases of fiduciary duty breaches.

How Can Partners Collect Evidence of Stealing?

Let’s face it: when business partners confront each other about theft, the situation can quickly grow. So before confronting the errant partner, collecting evidence is a must.

Even if a partner is “fairly sure” that their partner is stealing from the business, that is not a sufficient enough claim to fuel an accusation. Some partners will swear that they “just sense it” or that their partner is “acting weird” or “suspiciously.” These observations may have merit, but they are not substantial enough to support a serious theft claim.

The other partner must collect proof to prove that a business partner is stealing.

So how can the necessary proof be gathered?

Partners should place controls on their accounts and be strict about using receipts for all spending. Partners should also be more aware of all business spending, from ATM withdrawals to credit card use. Installing a camera at the cash register is a smart move if the partner suspects stealing is occurring.

Additionally, partners can agree to remove any unnecessary co-signers from accounts and limit cash access to only the partners or employees who must have it. Finally, the business can enforce safeguards preventing partners from easily accessing assets and cash. For example, the partners can require dual keys for the safe box or the premises or make dual signatures necessary for account access.

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 thinks they are 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 business lawyer can help individuals gather relevant proof and advise on taking the next steps forward in the case.

When Does Stealing Warrant Dissolution of the Business?

When a partner is certain that their business partner is stealing assets from the company, several options are available.

Filing a Lawsuit

Some partners immediately decide to contact a skilled attorney and take legal action. Filing a lawsuit usually includes the following:

Requesting an injunction against the partner who committed theft
Requesting to dissolve the company
A criminal complaint if the offense is fraud, theft, or embezzlement

Sometimes, the partner does not want to terminate the business, and the request to dissolve the company is left out.

Self-Help Remedies

Self-help solutions are typically reserved for the most extreme cases of partner theft. However, we urge partners to be careful with self-help solutions. Why? Because sometimes, they backfire, and the court believes that the victim is the one damaging the business.

If the partner decides to pursue self-help remedies, they should contact an attorney to help them do so carefully.

Dissolving the Partnership

Sometimes, the partners cannot continue with the partnership after the offense is committed or 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 the following:

Contract violations
Violations of fiduciary duty
Conflicts 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. Prosecution depends on the severity of the offense, but company partners who steal funds or spend erroneously often find themselves in grave legal trouble.

Company partners usually own 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 between the two parties can be:

Person to business
Business to business
Person to person

Suppose the individual or entity takes company 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?

Experienced attorneys and licensed authorities agree that thieves’ actions follow predictable patterns.

When individuals discover company theft, they usually do so by noticing a pattern. Therefore, when business partners maintain awareness of their surroundings, they have a better chance of discovering that one partner is behaving dishonestly.

Partners should take time daily to check on different aspects of the business. For example:

Does the company credit card reflect abnormal spending?
Are sales and profits suddenly skewed?
Is a certain employee spending more than normal or not working as diligently as usual?

Again, there are also specific actions that partners can take to make stealing more difficult, such as monitoring spending, placing controls on accounts, and increasing security measures in-person and online. These days, companies should feel comfortable using cameras, and partners should track all transactions.

For example, Dan runs an ice cream shop in Los Angeles, CA. called LA Cones, and lately, he has noticed a disturbing pattern. Profits are lower on Sundays, yet the restaurant goes through the same amount of burgers and fries. One of Dan’s employees, Natasha, always works on Sundays.

Dan installs a camera in the kitchen and at the cash register and quickly discovers two things. First, Natasha eats ice cream cones all day (employees receive one cone and one drink per shift and no more). Second, Natasha gives away candy and ice cream to friends and family members who visit her. Plus, Natasha sometimes forgets to charge customers for their fries!

Dan’s detective work clued him into the situation at hand, and he could deal with the issue promptly. Dan gave Natasha another chance, but when Natasha didn’t change her behavior, Dan fired her so his little shop could continue to achieve big things.

After a Partner Steals, What Are the Court Proceedings?

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

How they discovered the act of stealing
The direct evidence they have that the theft occurred

The authorities will then investigate the issue and substantiate the claim. Next, the officials will decide how to follow up and the next steps, and they will let the other partners know. Finally, the officials will also contact the person who has committed the offensive acts.

The partner who committed theft may be taken into custody and taken to court. Then, the next steps consist of the following:

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 free on bail, or the defendant will be detained. This decision depends on the investigation and the nature of the offense.

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.

If a Business Partner Commits Theft, How Can an Attorney Help?

When a theft occurs, the business partners must often consult the following:

The business partnership agreement or operating agreement
The company’s bylaws
Federal statutes
State statutes

The provisions in these documents usually dictate the partners’ rights when dealing with theft. Also, you may contact our California business attorney for a free consultation. However, these provisions tend to be complex, which is why it is vital for business partners who are certain someone is stealing to consult an attorney.

We understand how busy company partners are, and because of this, it may be tempting to wait to see if everything “blows over.” However, a direct and decisive approach is best when dealing with theft. An experienced business attorney can help get to the bottom of the issue, develop an appropriate strategy, and find a solution to the dishonesty plaguing the business.

Likewise, when a business partner charges personal expenses on the company card or outright takes money from the company account, the other partners must address these wrongful actions immediately.

At Nakase Wade, our California business lawyers and corporate attorneys focus on identifying and handling the problem at your company, so you can get back on the right track. Our goal is to ensure that your interests are protected. However, we also know how important it is that the assets you have worked so hard for remain in your possession.

When a business partner violates their fiduciary duty to the company, they can damage relationships, erode trust, and sometimes even cause the entire company to collapse. Contacting a skilled legal team early in the process allows business partners to deal with the problem, recover, and move forward.

If your business partner is stealing, there is no time to waste. Please contact Nakase Wade today for a free consultation. The sooner we begin, the quicker we can put the company theft behind us and move on to a brighter, more profitable future.

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