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Discussion Starter · #1 ·
Let me give you the back story and I hope some of the more experienced business people can shed some light on how to handle the situation.

This year I began a new LLC where each person has 50% ownership in the company. My partner had previously been a carpenter who had worked for me in the past and I thought very highly of his work. We were also childhood buddies, which further complicates the situation.

From the first few jobs we had cash flow issues, but originally based on trying to determine our pricing and how we determined the cost of our jobs. We lost money and I took money out of my pocket to cover the operating expenses. As time goes on we figured out our pricing, but we are still having cashflow issues. As a new business I anticipated some challenges with cashflow and was prepared for this but we are literally down to our last dollar all all the time.

I decided to dig through all our bank statements and I found lots of little transactions not related to business. I totaled them all up and it is a significant amount of money. As i

Further more we are in the middle of a very large total gut where there is a discrepancy of a few thousand on monies received from the customer. The customer had previously been his customer but now I also have a good relationship with them as well and asked them to show me the check images from their bank if possible. They found one check for the exact amount of the discrepancy that was written to my partners old business and deposited into his old business account.

I know I should have been keeping a closer eye on the numbers and am kicking myself for this already. I am also sure that if I really dig this check to his old business is not the only one. I want to figure out what if any options I have to recapture any of my money I put into the business and the money he took from the company.
 

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If you have contracts with the customer and the customer is willing to support you in court against your partner than there is little chance you could lose in civil court or whatever its called.
The judge would rule he'd have to do some sort of reimbursement but probably not enough to make it worth court costs, lawyer fees and days off work fighting him ... but that depends on what kind of numbers you're talking about.

I don't know how many ways there are out of paying a settlement, but I know people who were never paid it. Sometimes it just boils down to trying to squeeze blood from a turnip.

Do you think he still has the money? If so get some advice from a lawyer right away to see if a court can place a hold on the money or something (I have no idea) so he can't spend it till after the ruling.

If it were me I wouldn't approach him about it till after you have the evidence neatly documented and support from your customer - then I'd give him the option of coming clean and returning the money without a nasty court battle. I'd involve a lawyer in this process too and make sure the out of court settlement is binding and all.
 

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If there is any money left in the account you politely take back what your partner took and you cut your relationship. I had the same problem 40 years ago with an employee who I thought was a best friend. He did a job, took only $15 in cash from a customer and I fired him without giving the situation a 2nd thought. When it comes to stealing and lying there should be a zero tolerance policy. My most popular speech to all employees and especially new employees is I have zero tolerance for lying and stealing. There is no 2nd chance because there are two types of people; those who will lie and/or steal and those who won't. I am not god and I can't turn snakes into something good. And...don't let it bother you because it is not your fault and it happens every day. Dealing with stealing is just a part of running a business and nothing we should get emotional about. Never feel guilty about confronting your partner because in order to make the books transparent to each partner it is normal for partners to question each other in a polite way.
 

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I have a hard time understanding how it's enough money in any small business to support a business and two families.

Years ago my uncle and another man owned a very large , successful construction company here in our county. They built 75% of all the houses being built around. They owned tractor and trailers, bull dozers, trucks, lifts, property, etc. They were selling houses faster than they could build them.

My uncle never took a dime out of the company, They were paying for everything as they bought it.

At 42 years old, he decided to sale off his half of the company and RETIRE.

Long story, short, when they settled up, my uncle owed him money!

Instead of retiring and 'traveling' the world.....he drove 18 miles and went back to work laying brick for my dad. :whistling
 

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I would think you would be able to talk to your life long buddy who is your partner about this before bothering to ask what you should do about it...

It's obvious isn't it? Talk to your partner... better to find out now that you are not suited to be together in business than when you are 10's of thousands in the hole and lost a life-long buddy over money... whether legit or not...
 

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People don't suppose to screw over each other. Friends don't suppose to screw over each other. Sounds like 'life long buddy' isn't to good of a buddy.

It's probably time to dissolve your partnership and fly solo.
 

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If the partnership is a legal entity, press embezzlement charges, and go for court ordered restitution as part of the sentence. It's the ONLY way to get your money back.

Friends and family count on their embezzling being over looked - they figure you won't prosecute, and they know you can't force them to pay it back.
 

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I would think you would be able to talk to your life long buddy who is your partner about this before bothering to ask what you should do about it...

It's obvious isn't it? Talk to your partner... better to find out now that you are not suited to be together in business than when you are 10's of thousands in the hole and lost a life-long buddy over money... whether legit or not...
Stay in business with an embezzler? I don't think so.
 

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If there is any money left in the account you politely take back what your partner took and you cut your relationship. I had the same problem 40 years ago with an employee who I thought was a best friend. He did a job, took only $15 in cash from a customer and I fired him without giving the situation a 2nd thought. When it comes to stealing and lying there should be a zero tolerance policy. My most popular speech to all employees and especially new employees is I have zero tolerance for lying and stealing. There is no 2nd chance because there are two types of people; those who will lie and/or steal and those who won't. I am not god and I can't turn snakes into something good. And...don't let it bother you because it is not your fault and it happens every day. Dealing with stealing is just a part of running a business and nothing we should get emotional about. Never feel guilty about confronting your partner because in order to make the books transparent to each partner it is normal for partners to question each other in a polite way.
I like that policy. :thumbup: Gonna hold onto that one.
 

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Stay in business with an embezzler? I don't think so.
I think you missed the rest of the post... "better to find out now that you are not suited to be together in business than when you are 10's of thousands in the hole and lost a life-long buddy over money..."

That said, remember, you are only hearing one side of the story...
 

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I have a hard time understanding how it's enough money in any small business to support a business and two families.

Years ago my uncle and another man owned a very large , successful construction company here in our county. They built 75% of all the houses being built around. They owned tractor and trailers, bull dozers, trucks, lifts, property, etc. They were selling houses faster than they could build them.

My uncle never took a dime out of the company, They were paying for everything as they bought it.

At 42 years old, he decided to sale off his half of the company and RETIRE.

Long story, short, when they settled up, my uncle owed him money!

Instead of retiring and 'traveling' the world.....he drove 18 miles and went back to work laying brick for my dad. :whistling
I dont understand how people dont get it. If a business is run properly everyone is salaried for their position in the company. When my dad and I first partnered up I paid my salary doing carpentry, now its for running projects. At least in our company, no one is getting an owners salary for managing the company. We all have a job that would have to be performed by an employee if not a partner. If we down size, bag back up, ect...

The profit is not distributed but once or twice a year, no one in our company counts on profit to pay our household bills, we pay our selves a good salary, what we pay an employee to do that job.

Most independent business owners see the profit as theirs and take it all the time, and many live on the profit instead of a salary. Thats where the difference between someone who is an independent and wants to an independent and a guy like me, who wants a company. To do that, I believe you have to view your self as an employee of that company.

JMPO, your uncle didnt know or else didnt do what I just said when he had his company. We are 6 years old, we have made a profit every year, when we do twice the gross as the year before, we have banked twice the net. We use the same system, and are diciplined about it, whether we are blowing and going or barely making it, my day to day lifestyle doesnt change.

OP. Drop the partner, and file suit for your money if I was you. He is an embezzler. I would probably bring it up to him and find out what was going on, but id still go get my money back and drop him regardless.
 

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Profit is not what you pay yourself, it's what you pay your company...

End of year bonuses are only considered when all other considerations are addressed (i.e. - capital reserves, emergency fund, equipment, etc.)...
 

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I dont understand how people dont get it. If a business is run properly everyone is salaried for their position in the company. When my dad and I first partnered up I paid my salary doing carpentry, now its for running projects. At least in our company, no one is getting an owners salary for managing the company. We all have a job that would have to be performed by an employee if not a partner. If we down size, bag back up, ect...

The profit is not distributed but once or twice a year, no one in our company counts on profit to pay our household bills, we pay our selves a good salary, what we pay an employee to do that job.

Most independent business owners see the profit as theirs and take it all the time, and many live on the profit instead of a salary. Thats where the difference between someone who is an independent and wants to an independent and a guy like me, who wants a company. To do that, I believe you have to view your self as an employee of that company.

JMPO, your uncle didnt know or else didnt do what I just said when he had his company. We are 6 years old, we have made a profit every year, when we do twice the gross as the year before, we have banked twice the net. We use the same system, and are diciplined about it, whether we are blowing and going or barely making it, my day to day lifestyle doesnt change.

OP. Drop the partner, and file suit for your money if I was you. He is an embezzler. I would probably bring it up to him and find out what was going on, but id still go get my money back and drop him regardless.
I agree with what you're saying. The story about my uncle was back in the early '70s. the only contract they had was their word. They went in to business as good friends. And he had money going in , so he was putting everything back in the business trying to grow it. His partner turned out to be a crook. Hard lesson learned.
 

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One thing that's difficult in a partnership like this is when one person gets disgruntled because they think that they are doing more work or that their role is more important, skimming off the top is somehow justified in their mind.

From what I've seen, the only way that business partnerships work is when neither party has to depend on the business to survive. If my cousin and I had a lemonade stand, neither one of us would be interested in the money other than our salaries or our shares of the profits because our current incomes far exceed what a lemonade stand can produce.

Sure, we both want our "cut" because of the time and effort invested but the money that we make off of this venture isn't going to be the difference between whether I can make my mortgage payment or if he can put his kids through private school.
 

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Kinds of things actually happen a lot more often than people care to admit. I would recommend seeking legal counsel if you are unable to reach an agreement between the two of you. I would say look for a business and corporate attorney in your area. It's really sad how people can be.

Here in Houston we have a lawyer referral service that people can call to be sent to an attorney that can assist them .
http://www.njsba.com/for-the-public/lawyer-referral-service.html
 

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Discussion Starter · #20 ·
Thank you to everyone for taking the time to read and give some advice. It is very embarrassing to admit this has happened and putting it in writing and hearing other opinions helps to clarify the situation and

We are meeting to go over all the expenses, missing monies and the check that went to wrong account.

He claims that he wrote a check back to the company that went to him, but waiting on our bank to confirm or deny this.

After our meeting I will have a better handle on how to go forward, I will update as it plays out
 
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