What to Do When You Think a Business Partner is Stealing?

When a business partner is stealing, you can sue the partner for embezzlement. Embezzlement means the partner had a right to control the company’s money or asset and took the asset for personal use and benefits.

Embezzlement Examples in Business

Oliver and Sean are equal partners in a bicycle shop in San Diego, California, called Wheels 4 Real. The two partners and their modernly outfitted shop are amid a business boom and can barely keep up with the public’s demand for electronic bikes.

After a year of business, Oliver and Sean can pay off their start-up debts, hire employees, and renovate their shop. As general partners, Sean and Oliver signed a partnership agreement pledging to work in equal amounts and share the shop’s profits equally. So far, all has gone according to plan. The two even have time to take a bike ride together once a week and discuss business strategy while their employees run the store.

Oliver is more of a people person and loves dealing with customers and setting them up on the right bike. Sean dedicates himself to the financial side of the business and spends a lot of time in the back office going over sales profits and trying to put Wheels 4 Real in the best financial position.

By the third year, Oliver and Sean had made more money than they expected due to the e-bike craze sweeping through California and the entire west coast. However, Oliver begins to note that although sales steadily increase, profits are leveling off. Before Oliver can talk with Sean, he notices Sean acting differently.

Sean buys a flashy new car, new clothes, and e-bikes for all of his friends and his girlfriend. Sean also casually mentions that he has new business ideas and might want to open a surf shop in Ventura Beach soon and close Wheels 4 Real.

Oliver suspects something fishy is going on, so he does not tell Sean that the shop’s figures are off. However, Oliver begins to set financial controls and keep a more accurate track of the business’ profits and sales. When he does so, he realizes that the problems are worsening and that Wheels 4 Real has a mountain of credit card debt that was coincidentally kept hidden. All the credit cards with debt were signed on behalf of the business and—you guessed it—Sean.

Oliver does not just suspect that his partner Sean may be stealing; he is convinced of it. Once Oliver realizes his close friend is taking advantage of him, he must act. After all, Oliver has a wife and a child to think about. So Oliver must do something fast: but what?

Should Oliver contact the authorities or try to talk to Sean first? What are his options? And what if he is wrong about Sean’s debts and flashy spending habits? Can Oliver prove that Sean is stealing?

When a Business Partner Steals, What Should Partners Do First?

The above example may be fictional, but this story often occurs in the business world. First, when company partners find out their partner is taking money or assets from the business, they become resentful and angry. But next, the wronged partner must ask themselves:

Are they certain that the individual is stealing?
Do they have evidence that stealing has occurred?
Have they contacted the authorities or any other parties?
Do any other individuals know?

It is a jarring and unpleasant revelation when an individual realizes that their trusted business partner is stealing from the business. Of course, not all company partners are best friends, but they must trust each other to contribute their time and talents to the business, respect each other, and collect profits responsibly. Unfortunately, when one partner engages in trust, they disregard the rules the company was founded on and betray their partner’s trust.

More practically, theft can reverse financial gains and disrupt the partners’ plans for the future of the business. For example, suppose one partner is nearing retirement and hoping for a buyout. In that case, an incidence of theft could sap the company of Money, at least temporarily, and prolong or prevent the buyout.

Sometimes, company theft is too expensive and damaging for the business to stay afloat, and the partners decide to terminate the business. However, when stealing is discovered early and the business contacts an experienced lawyer, the company can often continue. Therefore, the sooner a business partner contacts a qualified lawyer for assistance, the quicker justice will prevail. While it can be difficult for some partners to face the fact that their partner has no respect for them or the business, the faster the partner takes decisive action, the better.

In this article, we will briefly move through every aspect of incidents of business partner theft, from obtaining proof to contacting an attorney to preventing future incidents of stealing. While theft is common, losing the business does not have to be the automatic result.

How Do Partners Find Proof of a Partner’s Theft?

When one partner accuses the other of theft, it goes without saying that the friendship will not survive. But what about the business? While the business may be damaged, if the business partner discovers the theft and takes the right steps, the business can survive and return to being profitable.

First, the partner must understand that the thief has damaged the company in multiple ways. In practical terms, the business will suffer due to the following:

Skewed numbers in sales and profits
Possible credit problems
Tax concerns
Security concerns
A tarnished reputation

Business owners, partners, and shareholders can fix these problems over time and with outside help. However, it is important to also consider the other facets of the company and whether they can recover. Incidents of theft also harm:

The morals and faith of employees in the company partners and the business
The morale of partners and their reputations
Overall company trust
Company work ethic

While businesses can recover from stealing incidents, it is never easy, and partners must accept that their company has been irreversibly changed once theft occurs. However, after the initial shock, business partners should also adopt a positive attitude. After all, the person who committed theft will soon leave the business, and the company will be better for it. First, however, is there evidence that stealing occurred?

Locating Evidence

Stealing is a serious offense and often an act that can warrant criminal charges. While partners often want to get rid of the problem as soon as possible, individuals who suspect stealing must take a deep breath and consider the evidence at hand.

Obtaining proof of the company theft is vital because accusers must be positive that stealing occurred. With evidence in hand, individuals can move forward with the legal process involving contacting an attorney. However, in many cases, business lawyers can help individuals locate and obtain evidence. So, how can individuals find evidence that someone is stealing from the company?

First, figure out exactly who is stealing. Is it one person, or is it a group of employees, for example, who are working together? For example, they steal from the business when a business partner diverts company funds into a private account and then uses the money to go on vacation. Likewise, when a group of night shift employees conspires to bring company property home, that is also stealing. However, these incidents are treated differently by accusers and in court.

Individuals should not make accusations without facts; that is where evidence comes in. For example, when partners suspect cheating and accuse a partner or employee with no support, the accusation can quickly backfire.

For example, Sam and Bill are cordial business partners but not very close. However, Sam notices Bill has been acting strangely lately, and when he discovers a blip in the sales records, he believes he has found an incident of theft.

Sam accuses Bill of taking Money from their company, but he is completely wrong. Bill points out two things: one, Sam made an accounting error. Two, Bill has been quiet lately because he is going through a divorce. Ultimately, Sam apologizes terribly, but things between the two partners are never the same again.

Sometimes, one or two minor incidents can be explained by an error in accounting or a missing or fudged number in the books.

Yet, when a missing company property, assets, or funds occurs, the correct parties should evaluate whether theft has occurred. Additionally, if a partner repeatedly notices that business profits fluctuate drastically or are widely skewed, they should immediately attempt to pinpoint the source of the problem. In times like these, it also makes sense to share the findings with a trusted colleague to see if they notice the same discrepancies.

Next, partners should make sure that they record all financial transactions. If there is any evidence of stealing, the goal is to continue to track it until evidence presents itself. Here are a few suggestions for actions partners should take before confronting the situation—or individual—directly:

Closely monitor financial accounts, from credit cards to bank deposits and withdrawals

Track sales and expenses paid.

Make receipts mandatory for all expenses with no exclusions.

The Many Forms of Theft

Acts of stealing come in many forms, and dishonest employees and partners employ varying schemes to take company money and remain undetected.

For example, some workers use the company card to withdraw small sums repeatedly; over time, the amount builds up.

On the other hand, a business partner might charge thousands on the business credit account and tell everyone that it is for “business expenses” when the Money is for a boat for themselves.

The act is known as a fraud when individuals behave dishonestly for their gain. For example, when individuals steal money by claiming they will use it for other means, the act is called embezzlement. Embezzlement is a specific type of fraud common in the corporate world.

Everyone at the business needs to remain vigilant due to thieves’ strategies. Therefore, we recommend installing cameras to capture employee behavior if the company suspects stealing. While this may seem to be a dramatic step, many businesses now have security cameras, and being able to capture footage of theft is the type of evidence that cannot be debated.

While direct evidence is vital, no one should break the law or unfairly target anyone to locate proof of stealing. However, whether the person stealing is a partner or an employee, they will not be brought to justice without direct evidence. Plus, when an individual accuses someone at the company of stealing but has no proof to back up their assertion, the case can quickly devolve into a “he said, she said” situation. The accused person will deny, the accuser will accuse, and there will be no deliverable verdict without proof.

For example, Rick is a co-owner of a coffee shop called Jitters in Lake Tahoe, California. Rick makes about $65 per hour but wants to buy a new truck, so he decides to pocket small amounts of money each day.

However, Rick’s partner, Monty, notices that the shop’s finances quickly turn. He also knows Rick doesn’t like serving coffee, doesn’t work hard, and wants a new truck badly.

Although Money is positive, Rick is taking Money from Jitters; he also smartly assumes that an employment accusation could do more harm than good.

How can Monty collect evidence?

First, Monty carefully tracks sales and receipts daily and weekly, paying more attention to discrepancies than usual. Then, Monty also checks these against the past weeks of the fiscal year. Soon, he has concrete figures that suggest that “something” is impacting the shop’s profits, even though all of the coffee and food prices have stayed the same.

Next, Monty installs a camera in the shop that captures all movements near the register. Monty also puts another in the back room, where employees change and store their stuff. Soon enough, Monty has footage of Rick stealing and placing the cash in his backpack at the end of the night. When added to the numerical records, Monty’s proof is undeniable.

Monty didn’t rush to conclusions, and he exercised patience. As a result, Monty collected all appropriate damages, and Rick resigned in disgrace.

When a person discovers that theft is occurring, they need a plan for dealing with it. An experienced business attorney can often provide recommendations for dealing with the problem quickly and effectively.

Question and Answer: What Questions Are Attorneys Often Asked About Company Theft?

Should Individuals Document Everything When They Suspect Theft?

If company finances seem off, then yes, company partners should document everything they can. There is nothing illegal about making detailed sales and profits records, and documentation often produces hard evidence. Plus, carefully documenting transactions is a great habit if you do not do it already.

When individuals suspect fraud, embezzlement, or even larceny, they should ensure that all transactions are recorded and tracked. Additionally, make sure to keep track of all interactions with the suspect, including emails and messages. For example, if there is reason to believe that a worker is exploiting the company credit card, obtain all credit card receipts and statements immediately.

Should Individuals Make Unconfirmed Accusations?

Accusing someone of business fraud or embezzlement is not a joke, and an errant accusation can land the accuser in hot water. Keep the suspicions to yourself until you obtain verified proof. Instead of bullying someone who may very well be innocent, use the time to collect proof of wrongdoing.

Should Individuals Discuss Options With an Attorney?

Business lawyers are one of the top resources for help with dealing with company theft. Whether the individual wants to begin with a quick consultation or is ready to take legal action, a qualified attorney can provide new insight into the case. Plus, many business attorneys have handled cases of theft before, and they will use their experience to help streamline the process, collect damages and get the company back in business.

Are Articles of Organization Important in Cases of Theft?

Whether the partners signed a partnership agreement or an operating agreement, it is an intelligent move for partners to refer back to these documents when theft occurs. Often, these documents include provisions for dealing with partners’ transgressions.

Business partners must follow the rules established in the company’s founding documents to deal with fraud, embezzlement, or theft. If they do not, they might be liable for legal actions themselves.

Should The Company Make Threats Regarding Criminal Penalties?

Embezzlement and fraud are real threats to all businesses. These acts also qualify as crimes and can be treated as felonies in the legal system. Fraud and embezzlement are punishable by extended terms in prison, depending on the amount of money stolen and the damage caused to the business and its partners.

However, when an individual shout out, “I’ll have you arrested,” in a fit of anger, it does more harm than good and may not be true to the case’s specific circumstances.

When someone steals from a business you worked hard to create, it is normal to become angry. However, instead of taking out one’s anger on the guilty party, take a deep breath and contact an experienced attorney.

Is Fraud the Same Thing as Stealing?

Fraud is a form of stealing. The act can take various forms, such as:

Use of company funds for personal reasons
Use of company money for a different company

If someone commits fraud, they do not merely steal Money from a cash register. Instead, they lied about what they would use the Money for. For example, if an individual says they are taking $500 from the business account for “company expenses” and then buys new clothes for their spouse, that is fraud.

Business partners must possess sufficient evidence to accuse a partner or employee of fraud and should contact a business lawyer familiar with fraud to build the case.

How Can Disputes Over Stealing Be Resolved Legally?

If a person commits fraud or embezzlement against the business, they should be removed from the company and face charges in a court of law. In addition, the business and its members may be able to recover damages for the stolen funds or assets.

Experienced attorneys can advise clients about filing criminal charges and also help negotiate with the guilty party.

When Should I Contact Nakase Wade

At Nakase Wade, we have helped many company partners deal with theft. Our skilled team knows how important it is to possess a strong strategy for eliminating theft and making sure it does not happen again.

Our skilled attorneys communicate with our clients at every step, and we work hard to get your money back, collect damages, and restore your sense of dignity and security.

Our California business lawyers and corporate attorneys know your company’s importance to you. But we also know that greed and dishonesty have no place in business.

Together, we will successfully deal with the problem so that you can move on with your corporate career and your life.

Business disputes can be unpredictable and stormy, but an experienced attorney can help calm unsteady waters. Contact Nakase Wade today for a free consultation.

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