Let me tell you a story I hear way too often.
Let’s call them Sarah and Mike. They’ve been friends since college, lived in the same dorm, trusted each other with their lives. Naturally, they decided to buy an investment property together in Asbury Park. It seemed like a no-brainer. Sarah had the credit; Mike was handy with tools. They shook hands, signed the deed, and started their journey as co-owners.
Everything was great. Until it wasn’t.
About six months in, Sarah gets an alert on her phone. A withdrawal from their joint business account. Five thousand dollars.
Her heart drops into her stomach. You know that feeling, right? That cold wash of panic. She calls Mike. No answer. She texts. Nothing. Later, he finally calls back, casual as anything. “Oh yeah, I hired a contractor to redo the siding. It needed it.”
Sarah didn’t agree to new siding. She didn’t even know the siding was bad. And just like that, the trust wasn’t just cracked; it was shattered.
If you’re reading this, I have a feeling you might be in Sarah’s shoes right now. Maybe it’s not siding. Maybe your business partner signed a lease you didn’t see, or hired their cousin without asking, or—worst case—is treating the company bank account like their personal ATM.
It makes you want to scream. But more than that, it makes you ask: Can they actually do that?
And honestly? The answer is messy. But we need to talk about it.
The “Silent” Rules of Partnership
Here’s the thing about owning something with another person in New Jersey: it’s a marriage. Just without the ceremony and usually with more paperwork.
When you go into business or buy property with someone, there’s an expectation of “fiduciary duty.” That’s a fancy legal term, but think of it this way: it means you have to have each other’s backs. You can’t prioritize your own interests over the partnership’s interests.
But where it gets tricky is defining what counts as a “decision.”
If your co-owner buys a box of printer paper without calling you, that’s fine. That’s “ordinary course of business.” If they sell the company van or take out a massive loan? That’s a major decision. And in most cases, major decisions require unanimous consent—or at least a majority vote.
The “Operating Agreement” Problem
Here is where most folks get tripped up. Did you sign an Operating Agreement or a Partnership Agreement when you started?
If you did, go find it. Blow the dust off it. Read the section on “Management” or “Decision Making.” It usually spells out exactly what one partner can do alone versus what needs a vote.
But if you’re like a lot of people I talk to, maybe you skipped that part. Maybe you just downloaded a template off the internet or, worse, did everything on a handshake because “we’re friends.”
If there’s no written agreement, New Jersey law (specifically the Revised Uniform Partnership Act or the LLC Act) steps in and acts as the referee. And the state’s default rules might not be what you think they are. Generally, they favor equal rights in management. Meaning, one person shouldn’t be acting like a dictator.
If you’re stuck in the middle of this and the tension is eating you alive, you might need help navigating partnership disputes before the business falls apart completely.
Why “Going Rogue” destroys businesses
It’s rarely just about the money. I mean, the money hurts. But it’s the disrespect that kills the partnership.
When a co-owner makes unilateral decisions, it creates two massive problems:
- Financial Liability: If your partner signs a contract with a vendor, the business is on the hook. If the business can’t pay, creditors might come after business assets. You could be losing money on a deal you never wanted in the first place.
- The “Freeze Out”: Sometimes, a partner making decisions without you is the first step in pushing you out entirely. They stop sharing info. They change passwords. They stop inviting you to meetings. This is actually a form of “minority oppression” (even if you own 50%), and New Jersey courts take it pretty seriously.
I’ve seen cases where a partner put a family member on the payroll for a “consulting fee” that did nothing. That’s not just a bad decision; that’s theft. You have specific rights if a business partner is stealing money, and you need to know them.
Expert Insights: When to Stop Being “Nice”
Look, I get it. Nobody wants to be the person who drags their business partner into a legal battle. It feels aggressive. It feels like admitting failure.
But here is my honest take after seeing this play out dozens of times: Silence is interpreted as permission.
If Mike spends $5,000 on siding and Sarah doesn’t formally object, Mike thinks, “Cool, I can do that again.” Next time it’s $10,000. Next time it’s $50,000.
You have to draw a line in the sand.
The “Business Judgment” Defense
Be prepared for this excuse. Your co-owner will say, “I did it for the good of the business! I didn’t have time to ask you!”
Sometimes, that’s true. If a pipe bursts at 2 AM, I hope my partner fixes it without calling a board meeting. But usually? It’s an ego trip. Courts look at whether the decision was reasonable and made in good faith. If they hired their own construction company to do the work at double the market rate? That’s not good business judgment. That’s self-dealing.
Do I Need A Lawyer?
This is the question you’ve been avoiding, right?
You might think you can talk sense into them over a beer. And hey, maybe you can. I hope you can. But if you’ve tried talking and they are still ignoring you, or if large sums of money are moving without your approval, you really, genuinely need a lawyer.
Not necessarily to sue them! That’s the nuclear option. But you often need a lawyer just to write a formal demand letter that says: “Hey, per our agreement and NJ law, you cannot do X, Y, and Z. If you continue, here are the consequences.”
Sometimes, just seeing that letterhead snaps people back to reality. It shows you aren’t playing around anymore.
Also, if you are looking to restructure the relationship so this doesn’t happen again, getting professional help with resolving a complex shareholder dispute can save the business from bankruptcy.
Practical Steps: What You Can Do Today
Okay, take a deep breath. You aren’t helpless here. If you suspect your co-owner is going rogue, here is your game plan.
1. Document Everything Stop doing business over the phone. If you have a conversation, follow it up with an email: “Just to recap our discussion, I did not agree to the purchase of the new van.” You need a paper trail.
2. Check the Bank Access Can you see the statements? If your partner has locked you out of the online banking, that is a five-alarm fire. You need to contact the bank immediately to assert your status as an owner, or get legal counsel to intervene.
3. Review Your Governing Documents Find that Operating Agreement. If you don’t have one, or if it’s a terrible one-page document you downloaded years ago, this is your wake-up call. Once the dust settles, you need to get solid shareholder agreements in place that explicitly state what requires a vote.
4. Don’t Retaliate This is hard. You might want to go empty the account to “protect” your share. Don’t do it. If you act recklessly, you look just as bad as them in front of a judge. Keep your hands clean.
Frequently Asked Questions
Can I fire my co-owner? Usually, no. Unless you have a specific buyout clause in your contract, you can’t just fire a partner. You have to negotiate a buyout or dissolve the partnership.
Can I sue them for the money they spent? Yes, potentially. If they breached their fiduciary duty or the contract, you can sue for damages. Often, this is settled by deducting that amount from their share of the profits (distributions).
What if we never signed anything? You still have rights! New Jersey’s default partnership laws protect you from being excluded or having your assets wasted. You are not out of luck just because you lack a formal contract.
The Bottom Line
Back to Sarah and Mike.
Sarah tried to be “nice” about the siding. She let it slide. Two months later, Mike signed a long-term lease for office space they didn’t need. The business eventually folded under the overhead costs, and their friendship ended with it.
It didn’t have to end that way.
If you are feeling that pit in your stomach because a co-owner is making moves without you, trust your gut. It’s not “just business.” It’s your investment and your future.
You don’t have to handle this alone. In fact, you probably shouldn’t.
If you need clarity on your rights or just need someone to help you draw that line in the sand, contact us today. Let’s figure this out before the next unauthorized withdrawal hits your account.
