Legal Steps to Take When Your Business Partner Is Stealing from the Company

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Owning a business has its challenges and difficulties. It’s much easier to manage and run everything when you go into a partnership, however. Just by looking at today’s massive corporation, many were built on solid partnerships—Ben & Jerry’s, Apple Inc., Microsoft, and Procter & Gamble, to name a few.

Sometimes, however, business partnerships don’t go well as expected.

What if a partner is not honest during business dealings? What if a partner is involved in illegal activity? What if a partner suspects the other of stealing from the company?

Suppose you’ve discovered a secret bank account linked to the company, falsified accounting records, or funds disappearing. In that case, your business partner could be stealing from you. What can you do about it?

You may pursue legal actions. Here are the first steps you need to take:

1. Find Out What Kind of Theft Occurred

There are five ways how your business partner could be stealing from the company:

  • Physical Theft. If you have a petty cash drawer in the office, check its balance every day. If it’s losing a few dollars, you should start worrying. Small-scale theft has the potential to escalate and end in more enormous sums. And it’s not always about the money. Office supplies, warehouse inventory, and even company vehicles could be missing right under your nose. It’s important always to check the status of the company’s physical assets to avoid this.
  • Embezzlement. Whether it’s you or your partner’s job to handle financial accounts, it’s wise to keep a monitoring system to document the amount of money that goes in and out (cash flow) of the company. Without one, a business partner can manipulate the company’s accounts and records to show that money is nonexistent anymore because it’s been stolen or embezzled. Your business partner has directed the funds towards personal accounts or other business ventures.
  • Fraud. When a business partner uses the company’s money to purchase a nonexisting product, service, or insurance for business use, that is fraud. Fraudulent business partners often engage in illegal activities just to get money from the company. They could be enlisting a family or friend as a consultant, using the company’s money as payment. They can also create fake addresses or customer accounts to send your company’s products in exchange for money. Worst, they can cause damage to property to get an insurance claim.
  • Breaching a Fiduciary Duty. Business partners are bound to a duty of loyalty. This requires them to act in good faith and honesty with the company’s best interests to which they’ve sworn. Stealing from the company is a breach of this duty.
  • Intellectual Property Theft. When a business partner shares trade secrets, company software, and other intangible assets, that is considered intellectual property theft.

2. Hire a Business Litigation Lawyer

Suppose you notice one or all the mentioned illegal activities you suspect your partner is doing. In this case, you need to hire an experienced business litigation lawyer who can help you get through the process. A business litigation lawyer can handle breach-of-contract cases, business partnerships, employment cases, and shareholder disputes.

3. Obtain Evidence

It is not wise to merely accuse a partner of theft without solid evidence. To build a strong case, you should obtain actual proof that your partner is stealing money from the company. Most courts will not consider a missed entry in the books, an accounting error, an impounded vehicle, a hacked customer relationship management software, or a simple mistake as theft. The pattern of thievery should be something you’ve tracked through accounts, receipts, forms, and other documents. Photos and videos are also substantial shreds of evidence.

The challenge is obtaining documentary evidence out of the jurisdiction where you and your lawyer will file a case in the trial court.

A subpoena is issued to produce information that courts can use as evidence. But if the evidence and trial court are in different, separate states, a subpoena must be domesticated. In this case, you’ll need to reach out to a firm that specializes in subpoena domestication procedures.

4. Court Proceedings

After gathering all necessary evidence, you and your lawyer can now take your case to court so the authorities can start investigating your partner. If there is substantial evidence, your partner will be arrested, and court proceedings will ensue in the following order:

  • The allegation of theft will be read to your partner, the defendant.
  • Your partner will enter a plea.
  • The court will determine the time and date of the hearing.
  • Depending on the investigation and severity of the accusation, your partner will either be detained until trial or released on bail.
  • The case proceeds to trial.
  • If found guilty, the courts can sentence your partner a hefty fine, jail time, or both.

You Should Not Do This Alone

Business theft is a serious case, especially fraud. It’s both a criminal and civil case. It can lead to the accused incarcerated for a long time. In fact, one of the most prominent fraud cases led to 12-year imprisonment in New York. So before you file a case, plan everything carefully and get the seasoned advice of an expert.

Companies succeed if all its parts work together. However, when you notice a pattern of the company siphoning money elsewhere, that’s when you should be suspicious. While this might be a frustrating experience, you shouldn’t throw accusations without proof. In this case, all you can do for now is gather evidence, lawyer up, and let the system do its work.

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