You know that feeling. The one where you’re looking at a bank statement at 11 PM on a Tuesday, and the math just isn’t mathing.
Your stomach drops. You check it again. Maybe it’s a mistake? Maybe they withdrew that cash for a vendor and forgot to log it? But deep down, you know.
Discovering that a business partner might be stealing from the company isn’t just a financial hit. It feels like a betrayal. It’s personal. You’ve built this thing together—sweat equity, late nights, missed family dinners—and now, the person you trusted with the keys to the kingdom might be looting the castle.
If you’re sitting there in a cold sweat asking, “What are my rights?”—take a breath. You have them. And you have options.
Let’s walk through this, not like lawyers in a boardroom, but like two people trying to save what you’ve built.
The Reality of the “Business Divorce”
First, let’s be real about the impact. When money goes missing, it’s not just about the numbers. It’s about the mortgage you need to pay and the employees relying on you for their paychecks.
Theft disrupts everything. It kills morale, obviously. But it also puts the business at risk of insolvency. I’ve seen solid, profitable businesses crumble not because the market turned, but because one partner decided the company account was their personal piggy bank.
And honestly? It happens more often than you’d think.
Usually, it starts small. A personal expense put on the company card. “I’ll pay it back next week,” they say to themselves. Then next week comes and goes. Then it’s a car lease. Then it’s cash withdrawals.
By the time you notice, the hole is usually deeper than you think.
“What Are My Rights?” (The Deep Dive)
Okay, let’s get into the meat of it. You’re likely feeling angry and ready to change the locks, but you need to move carefully.
1. You Have the Right to Inspect the Books
This is your first and most powerful right. Unless you signed something incredibly strange, as a partner or shareholder, you have the right to see where the money is going. You can demand access to bank statements, credit card records, and accounting software.
If your partner suddenly locks you out of QuickBooks or “forgets” the banking password? That’s a massive red flag.
2. The Right to “Fiduciary Duty”
This sounds like fancy legal jargon, but think of it like a marriage vow for business.
Partners and officers owe a fiduciary duty to the company. That means they legally must act in the best interest of the business—not themselves. Using company funds to pay for a personal vacation, a new kitchen, or a gambling habit is a clear breach of that duty.
If they’ve broken that vow, you have legal grounds to go after them.
3. The Right to Sue for Damages (and Maybe More)
If the theft is proven, you can generally sue to get the money back (restitution). In New Jersey, for example, if you’re a minority shareholder and the majority partner is oppressing you (and stealing counts as oppression), the courts have specific remedies to help you break free or force a buyout.
You aren’t powerless here.
Common Misconceptions: “Maybe I’m Overreacting?”
I hear this a lot. “Well, they said they’d pay it back.” Or, “Technically they own 50%, so isn’t it half their money anyway?”
No.
The money belongs to the entity (the LLC or Corporation), not the individuals. Even if you own 100% of a company, treating the business account like a personal ATM is a great way to “pierce the corporate veil” and get yourself in trouble with the IRS or creditors.
If a partner does it without consent? That’s unauthorized appropriation of assets. In plain English: theft.
It’s often messy because there’s emotion involved. Maybe they’re going through a divorce or a hard time. You feel bad. But you have to protect the business first.
Solutions: How to Stop the Bleeding
So, what do you actually do? Here is the roadmap.
Step 1: Gather Evidence (Quietly)
This is the hardest part. You want to scream at them. Don’t. Not yet.
If you confront them before you have proof, they can destroy evidence, hide funds, or spin a story.
- Download all bank statements.
- Screenshot suspicious transactions.
- Save emails where they discuss finances.
- Look for vendors you don’t recognize (fake vendor fraud is a classic move).
Step 2: Check Your Operating Agreement
Remember that stack of papers you signed when you started and shoved in a drawer? Dust it off.
Your Partnership Agreement or Operating Agreement usually lays out exactly how disputes are handled, how money can be withdrawn, and the process for removing a partner. If you don’t have one… well, rely on state law (like the Uniform Partnership Act), but it gets stickier.
Step 3: Bring in the Pros
You cannot DIY this. You need a third party to look at the numbers objectively. A forensic accountant can trace the funds.
And yes, you need legal counsel. Specifically, someone who understands business litigation and dispute resolution. You need to know if you should file a lawsuit, seek an injunction to freeze accounts, or try mediation.
Actionable Tips to Protect Yourself Now
If you suspect foul play, here are things you can do immediately:
- Tighten the Digital Leash: If you’re an admin on the bank account, set up alerts for every transaction over a certain amount (say, $100). You’ll get a text instantly when money moves.
- Audit the Credit Cards: Look at the monthly statements. Not just the total due—the line items. Are you paying for their Netflix? Their gas? Their groceries?
- Don’t Sign Anything Yet: If your partner senses you’re on to them, they might try to get you to sign a “release” or a new agreement. Do not put pen to paper until a lawyer reviews it.
- Separate Personal from Business: If you’ve been lax about this too, clean up your own side of the street. It’s hard to accuse them of theft if you’re also using the company card for personal lunches.
- Consider a “Freeze”: If the theft is active and draining the accounts, your attorney might be able to help you get a temporary restraining order or freeze corporate assets to stop the bleeding immediately.
FAQ: The Questions You’re Too Scared to Ask
Can I call the police? Technically, yes, embezzlement is a crime. However, police often view partnership disputes as “civil matters” and won’t get involved unless the theft is massive and clear-cut. Usually, your best route is civil court first.
Can I just lock them out of the building? Careful. If they are a legal owner, locking them out without a court order could actually get you in legal trouble for “oppression.” Partnership disputes are tricky; don’t go rogue.
What if we never signed a formal agreement? It’s a headache, but not a dead end. State laws provide default rules for partnerships. You still have rights, but proving the terms of your partnership will rely more on conduct and emails than a single contract.
Conclusion
Look, realizing your partner is stealing is heartbreaking. It feels like a death in the family.
But don’t let the shock paralyze you. The longer you wait, the less money there will be to recover. You have rights. You have the right to honesty, to fiduciary loyalty, and to the assets you worked so hard to build.
If you’re staring at those bank statements and feeling that pit in your stomach, trust your gut. Then, verify with evidence.
You don’t have to navigate this betrayal alone. If you need to figure out your next move or understand exactly where you stand under New Jersey law, reach out to us. Let’s look at the facts and figure out how to protect what’s yours
