When things go sour in a business partnership, you might have the urge to walk away and never look back. It’s a situation no one wants to find themselves in, but it happens quite often – someone you once trusted financially, in business and in life, is now betraying you and the empire you created together.
But like a nasty divorce, there’s a right way and a wrong way to do business. Beyond putting the company at risk, your business partner’s actions may also put you in a precarious position. You may risk future liability if you don’t carefully make the right moves and seek a skilled attorney to help you navigate this sticky situation. Read on to learn more about what you should do if you find your business partner engaged in criminal conduct.
What counts as a criminal activity?
There are several different types of crimes that your business partner can commit that can impact you and your company. The nature of your partner’s conduct or criminal activity will dictate how you should respond and what might happen to the future of your company.
Some of the most common issues surrounding a partner’s criminal activity involve the following types of crimes:
- Directly stealing from the partnership, or embezzling from business accounts.
- Improper use of company funds, such as abusing expense reimbursements for personal use.
- Crimes unrelated to the business, such as domestic violence or personal tax filing fraud.
- Committing IRS tax fraud on behalf of the partnership by deliberately lying or misrepresenting information, unlawfully distributing assets to foregin accounts, etc.
You might think you’re off the hook if you weren’t directly involved in any of these criminal actions. However, as co-owner of the business, you can very likely still suffer serious consequences even though you didn’t personally partake in the crime.
Am I liable for my business partner’s crimes?
Under state and federal law, it’s highly possible that your partner’s behavior will affect what happens to you, too. Depending on the crime, you could go to jail, or perhaps more likely, you could end up paying out future lawsuits and hefty fines.
There are some circumstances in which you may be held civilly or criminally liable, such as:
- If you were aware of the crime and failed to report it or take any action.
- If you directly profited from the crime in some way, which is very likely if the criminal activity benefited the company financially.
- If you reasonably should have been aware of the crime, especially if you serve in any type of supervisory role.
Just because your partner is officially convicted of a crime, doesn’t necessarily mean you’re going scot-free. Residual criminal or civil repercussions to you and your business is still possible, and that’s why we highly recommend you consult with an attorney to navigate this complicated situation.
What are my options if my business partner is breaking the law?
Ideally, you would have had an experienced attorney draft up a partnership agreement, bylaws, or operating agreement when you established your business together. That way if disagreements occur, or if your partner is committing criminal activity, you have a solid game plan to execute when situations get messy.
If your business lacks any formal documents governing the expulsion of a partner, then your next best bet will depend on the model your business operates under (LLC, corporation, etc.), whether you have evidence to back up the criminal intentions of your partner, and the nature of the criminal activity.
Whether or not you have evidence of your partner’s criminal actions, you should immediately contact the Law Offices of Robert J. DeGroot to protect you and your business from any potential future problems. Our attorneys can help you craft a plan suited to your unique needs, such as dissolving the business entirely and starting over, buying out your partner to remove them from the business, or requesting your partner to reimburse the improperly used funds.
Dealing with a rogue business partner? You need DeGroot!
As much as you might be tempted to walk away from the partnership and start anew, you and your business may still be in jeopardy for the actions of your former partner. Talk to our attorneys at the Law Offices of Robert J. DeGroot to get a true team on your side who is committed to protecting you and your rights.
Don’t hesitate before it’s too late. Contact us TODAY for your confidential consultation with our experienced attorneys.
