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Hyland Law Firm, LLC June 3, 2013

On behalf of Hyland Law Firm, LLC posted in Kansas Business lawyer on Monday, June 3, 2013.

Your business has been doing very well for the last year, although from looking at the books, you would think the opposite. Your business partner does not seem worried in the least, which starts to make you suspicious that your partner may be embezzling partnership funds. Embezzlement is the "[f]raudulent taking of personal property with which one has been entrusted", as defined by Black's Law Dictionary. Unlike common theft, embezzlement involves the theft of a certain item by a person with a fiduciary duty, or a responsibility, to act in the best interests of another person or entity. Specifically, business partners have fiduciary duties not only to their business, but also to each other. This means that if one partner is truly embezzling partnership funds, he or she may be on the hook not only to his or her partners, but also to the business as a whole.

Overall, when a company suspects that one or several partners are embezzling funds, the issue can be rather daunting to address. For example, partnerships typically face a litany of serious challenges when one partner accuses another of embezzlement - especially if he or she is wrong. An unjust accusation by one partner can also lead to a claim of libel or defamation, so before pointing the finger at a business partner, it is important to consider the following signs of embezzlement:

  • Working unusual hours: If the partner in question usually works a typical 9 am to 5 pm schedule and then abruptly changes it, without warning or explanation, to nights and weekends-you may have cause for concern.

  • Commingling: Watch to see if the partner has been using business accounts to pay for personal expenses and/or depositing partnership funds into his or her personal account.

  • Suspicious records: Your review of business records reveals unexplained losses, costs or missing deposits.

  • Billing errors: You receive complaints from your customers that they have been overcharged or that their payments have not been correctly applied.

  • Unpaid bills: You receive notice from your suppliers or other vendors that invoices have not been paid in full or in a timely fashion.

  • Unusual spending: You notice that your business partner has been taking lavish vacations and purchasing items that seem out of character.

  • Gambling: You learn that your business partner has been spending more time gambling and less time at the office.

Once you have determined that a partner (and not an employee) is stealing from the business, you need to collect as much evidence as possible. The key to proving embezzlement is the ability to trace the misappropriation of partnership funds from the business to the partner. Oftentimes, it is difficult to determine whether a partner intended to deprive the partnership of the funds or whether the apparent misappropriation was the product of a mistake or sloppy record keeping. If you have not done so already, now is the time to consult with an attorney. Experienced business litigation attorneys often work in conjunction with forensic accountants to make this distinction and help guide you through the entire process of mounting a case against a suspected embezzler. Additionally, a seasoned partnership dispute attorney can not only advise you of your options but protect your interests as well.

If you believe that your business partner is embezzling partnership funds, contact my office today to schedule a free and completely confidential consultation. At the Hyland Law Office, we will take the time to thoroughly review your situation and advise you of all of your potential options. We look forward to providing you with exceptional legal services.