Business Partnership Advisor
Together, we can fix your business and partnership problems
Chris Reich, Business Luminary
What to Do When Your Business Partner Takes Money Without Talking to You
When your business partner takes money from the business without talking with you it’s the sign of a serious problem. If you don’t deal with it now, it could be a disaster later.
My Partner Is Taking Money Without Telling Me
This is one of the most common problems that lead people to call me. No matter how small the amount, taking money without talking without mentioning it is serious because it breaks trust. If your partner is able to take money without consequences, the amount taken will grow. They might take $100 this week but they’ll be taking a lot more soon and they’ll take it more often. It has to stop before the partnership is destroyed. But before you get aggressive about dealing with it, start by giving your partner the benefit of the doubt.
Everyone Needs Money
We all need money. Many partnerships are formed between parties of unequal economic status. That means one partner may need money when the other partner does not. For example, a doctor’s wife and a single mom start a cookie business. They rent kitchen space and each puts up $2500 to buy tools, supplies, and marketing. In a few months the business is doing well by supplying local restaurants with their gourmet cookies. The two partners decide to take $200 each per week as salaries. Hopefully, as they expand they will take more and more.
Then the trouble starts. The single mom writes herself a check from the business for $150. The doctor’s wife, the keeper of the books, lets it go. A couple weeks later another check is issued for $100. Now the tension starts.
It’s not good to just take from the business without discussing it with your partner though you have a right to do so. That’s correct, a right. Without a written agreement on money, partners have a right to take money from their own business. It may be okay but it’s not okay. Taking money without a discussion is bound to lead to trouble. You can understand, looking at this from the outside as I do, that the single mom may have a greater need for money that the doctor’s wife, right? Even though it is understandable, the tension still rises.
That’s why I always start money conversations by asking about any needs that may have come up recently. Think about things like a broken car, a sick child, leaking water heater, or any of the other zillion things life throws in out path. Before you get all over your partner, think about these things first.
There Are No Personal Problems. Now What?
When your partner takes money without telling you, start by giving them the benefit of the doubt.
Chris Reich helps partnerships resolve money issues.
How Was the Money Taken?
The next thing to consider is how the money was taken from the business. If your partner wrote a check for cash it is less serious than if your partner pocketed cash. The first consideration is whether there is documentation for the money taken. In other words, was there an effort to conceal the withdrawal from you? (And the business records and the tax records, etc.) Though a partner is legally free to take money from the business without permission when there is no agreement in place, they aren’t free to steal from the business. If cash is taken and not documented, your partner could be in criminal territory. Depending on the amount(s), you may need to act to have your partner removed from the business.
No Lawyers Please. Can’t We Fix This?
Sometimes. I’ve stepped into cases like this and been able to repair the relationship and get the business onto a better course. Fixing the problem is possible if you act before it becomes too serious or simply a way things are done. If you put up with bad money behavior for months or years it is much harder to fix than if there have been only a couple of minor events. Even if your partner took cash without telling you, we could fix it unless the amounts are beyond forgiveness.
Probably the most important indicator of whether you can repair a money problem is the attitude of your partner. If your partner has the position that “I can take money anytime I want to and there’s nothing you can do,” the problem is much more serious. There is a lot you can do though it won’t be pleasant.
If your partner is willing to work things out if the solution includes making more money, you’ll be able to get through it if you act soon. If your partner is beligerant and refuses to talk, the problem might be too deep.
Make Rules and Agree to Them
If there is an opening to talk the problem through, it’s important to make some rules about taking money from the business. No one likes to plead for money. I always recommend that partners be able to take money on a limited basis without asking ‘permission’. Set up something like allowing a partner to take up to $500 in a business quarter without having to ask and only if needed (need is relative). This, of course, depends on the size of the business. Be practical. Also, consider putting performance bonuses in place. That gives your partner some extra motivation.
Work It Out
If there is a way and a little bit of will, work out the money problems without going to court. I understand that some readers of this post may be dealing with a lot of money. But the bigger the case in court, the more expensive it will be and the longer it could take.
Do whatever you can as quickly as you can to resolve money issues before they blow up and end the friendship, partnership, and possibly sink the business ship! (Grammar push!)
Chris Reich, Partnership Moderator
“If there is a way and a little bit of will, work out the money problems without going to court.”
Partners take advantage of partners every day and they get away with it. It is the most painful call I get. It sounds like this, “I put all the money I had into starting our business. My partner had bad credit and no money, but he promised to do all the work to get the business going.
While it seems like it should be very easy to get out of an LLC, it can be complicated. Even if the business is very small, there are considerations beyond getting your money back. In this post, I’ll try to hit the important points of getting out of an LLC Partnership. These same items apply if you want to remove a member from your LLC too.
Sometimes people will intentionally make an effort to trigger anger, frustration, or irrational behavior. As a Business Partnership Mediator, I see this behavior often and can help calm things down so we can have a rational discussion toward resolution. Seeing ahead is a super-power! I can see where the problems are and the best possible outcome.