What to Do if Your Business Partner Is Stealing

Realizing that your business partner is stealing from you after building a business together can be a crushing blow. While it’s easy to feel overwhelmed by shock, anger, and betrayal, knowing what steps to take next is essential to safeguard your assets and hold your partner accountable for violating your trust. Whether your business partner committed fraud, theft, embezzlement, or other breach of fiduciary duty, taking swift legal action is paramount to preserving your hard-earned reputation and financial security.

In this blog, we’ll review some essential steps to take if your business partner is stealing from you.

Determining the Type of Theft Crime

To bring civil or criminal charges against your partner, you must first understand the type of crime they committed. There are various types of theft crimes in California, including:

Fraud

Under California law, fraud is defined as intentional misrepresentation, deceit, or concealment of a material fact for unfair personal gain, resulting in harm or loss to another person. For example, if your partner requests $500 for a business expense, but spends the money on personal expenses, this is considered a fraudulent act.

Embezzlement

Embezzlement is defined as the unauthorized use or misappropriation of funds entrusted to an individual or business. This white-collar crime occurs when a business partner, CEO, employee, manager, or other member of an organization takes company assets without authorization. Common examples include stealing cash, using company credit cards for personal expenses, or falsifying expense reports.

Breach of Fiduciary Duty

Put simply, a fiduciary relationship is established when one party trusts another party to act in their best interests. California law defines fiduciary relationships as “any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party.”

A breach of fiduciary duty occurs when a business partner or other individual in a position of trust fails to uphold their obligations to the company and co-owners. In these cases, the offending party may be legally liable for damages or losses that ensue as a result of the breach. Common examples include using company assets for personal gain, disclosing confidential information to competitors, or engaging in self-dealing transactions.

Filing Civil vs. Criminal Charges

Depending on the severity of the theft and the amount of damages incurred, you may choose to file a civil lawsuit or pursue criminal charges against your business partner. Below is a brief overview of each:

Civil Lawsuit

Filing a civil lawsuit allows you to seek damages from your partner for the financial harm they caused, such as compensation for stolen funds, lost profits, reputational damage, and any other losses incurred as a result of their theft. To successfully win a civil lawsuit, you must provide evidence that proves your partner committed the wrongful acts. The evidence usually includes bank statements, financial records, and witness testimony.

Criminal Proceedings

If your partner’s actions constitute a criminal offense, you may want to pursue criminal charges. You can initiate the process by filing a police report with the proper law enforcement agency. Depending on the severity of the crime, your business partner could face fines, jail time, and a criminal record. However, the criminal process can take years, and engaging a skilled attorney to file a civil lawsuit can mean the difference between recovering your money quickly and efficiently, and a years-long process that may or may not result in a recovery.

Remember, it’s important to consult a skilled business lawyer before pursuing civil claim or criminal charges against your business partner. The right attorney can help you understand the legal implications involved and ensure you have a strong case.

5 Steps to Take if Your Business Partner Is Stealing

Securing skilled representation is vital to recovering your assets after theft, fraud, or embezzlement. Below are 5 steps to take if your business partner is stealing from you:

1. Seek counsel from an experienced business lawyer. While it may be tempting to confront your partner directly or secretly monitor their activities, seeking sound counsel is a nonnegotiable first step to protecting your best interests. Allegations of theft are difficult to prove in court, making it crucial to consult an attorney skilled in recovery of theft and fraud who can fortify your claims with compelling evidence and pursue a just outcome.
2. Protect your assets. If your business partner is stealing from you, it’s essential to take immediate steps to protect your assets, such as changing account passwords, limiting access to company funds, or seeking a restraining order if necessary. However, you should not take these steps without the assistance and counsel of a skilled lawyer, or you might expose yourself to liability.
3. Notify appropriate authorities. If you believe your partner’s actions constitute a criminal offense, it’s essential to notify the proper authorities immediately. This may include contacting the police or reaching out to the FBI if your partner engaged in federal offenses.
4. Gather evidence. Collect any documentation or evidence that supports your claim of theft, fraud, embezzlement, or breach of fiduciary duty. This may include bank statements, checks, wire transfer information, financial records, contracts, or other proof. .
5. Evaluate Your Insurance Coverage. Your insurance policy might provide coverage for a theft loss. Contact your insurance representative to determine whether you have such coverage, and if so, how much coverage and any deductible. Your insurance company will want you to provide them with proof of the loss, which again highlights the importance of gathering evidence supporting your claim.

Business Litigation Attorneys with 30+ Years of Experience

Our seasoned business litigators at Kirk & Toberty, Attorneys At Law have decades of experience representing clients in a wide range of business law disputes. Our extensive understanding of theft, fraud, embezzlement, and pre-judgment seizure remedies in California makes us well-equipped to safeguard your financial interests and pursue justice on your behalf. Our Irvine attorneys go above and beyond to provide personalized representation while keeping you informed and up to date about your case. With a proven track record of results and over 75 years of combined experience, you can trust our firm to prioritize your case from start to finish.

If you're the victim of theft, fraud, or embezzlement, don't throw away your hard-earned money by failing to secure experienced representation. Contact us online to discuss your case with our business litigation attorneys.