Business partners share responsibility for the organization that they run together. They also usually have obligations to one another as established in their partnership agreement. They also both have to take a loss if the company fails.
Despite the intertwined legal and financial circumstances of business partners, one partner may choose to misappropriate assets or intercept payments intended for the business. If one partner credibly suspects the other of embezzling from the organization, they may need help addressing the issue.
How can one business partner hold the other accountable when they uncover signs of embezzlement?
With accurate documentation
Financial records, security camera footage, client statements and other evidence are critical in an embezzlement case. The partner who now suspects significant financial misconduct typically needs to gather as much documentation as they can before they take additional steps. Otherwise, their partner might destroy or alter evidence, making it harder to build a legal case. They may need to hire a forensic accountant to make sense of the company’s financial records and quantify the impact of the embezzlement.
With appropriate support
Once one business partner has evidence of financial misconduct, they likely need to discuss the matter with a lawyer. An attorney can help them review the partnership agreements, company records and collected evidence to determine the best path forward. Many times, it is possible to resolve embezzlement allegations without involving authorities. One partner can hold the other accountable without asking the state to prosecute them. They may instead propose a buyout.
With a reasonable offer
An individual convicted of an embezzlement offense has to serve a criminal sentence, which might include jail time. They have to pay fines and court costs. They may also be subject to an order of restitution issued by the courts that forces them to repay the amount embezzled from the business. When compared with those consequences, a buyout proposed by the other partner can be a much more amicable solution. The partner who has not embezzled can schedule a meeting and then present evidence to the other partner, possibly in the presence of their lawyer.
In cases where the embezzlement goes beyond the cost of a buyout, it may be necessary to negotiate an arrangement in which the partner who embezzled repays the other partner or the company itself for the value of the goods or funds embezzled from the organization.
No one should have to remain trapped in a business relationship with someone who has proven to be dishonest. Holding a partner accountable for embezzlement may require careful planning. Business owners who secure support as early as possible have the best chance of holding an embezzling partner accountable while preserving their company.