FundRobot » Fund Management » Partner in a 50/50 LLC Froze joint account and accused me of theft and is slandering me?

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Old   #1 (permalink)
 
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Default partner in a 50/50 llc froze joint account and accused me of theft and is slandering me

I am in a 50/50 partnership (it's an LLC) and have been the managing partner for the duration if the 16 months we have been in business. My partner has physically worked at the business maybe 5 times during the 16 months. I work there daily and have received a weekly salary since we began. We also each take an equal, monthly members draw. My partner has not looked at our quick books or a bank statement the entire time we have been in business. Two weeks ago he decided to look at a bank statement and saw personal charges I have made using our business account debit card and without speaking to me or looking at the books, jumped to conclusions and froze me out of our joint business bank account. I have coded any personal purchases as a draw to myself and also shorted my weekly check to reimburse any purchases. Had he looked at the books or simply asked me to explain his concerns he would have seen this. He is now accusing me of stealing cash from our business and also is telling me that I will now be paid only for the hours I am physically at the business. He has told all of our employees that I have been stealing and will either pay it back or go to prison. Our operating agreement clearly states that any management decisions must have both partners authorization. Now customers are asking our staff if it is true that I have been stealing so he is obviously slandering me and I feel has damaged my reputation. Has anyone else dealt with a similar situation? He seems to not grasp the concept that I am an equal partner and not an employee.
I have already consulted 2 attorneys and we are moving forward with legal action. Both have advised that this is clearly breach of contract and there's a strong case for slander. I'm just wondering if anyone has dealt with a similar situation and what the outcome was.
Yes, I have actually spoken with 2 attorneys. And no, he is not a controlling member. Note the 50/50 partnership that is clearly stated. He would have to be 51% in order to be a controlling partner. And it's a violation of the operating agreement because he can not make management changes without both partners consent. As far as the slander, I have text messages from him stating he doesn't know how to use quickbooks and that he doesn't have all the information (receipts, daily cash sheets, etc.) he needs in order for him to "figure it out". You can't know that someone is guilty of something without information , therefore you can't go around stating as fact that someone has done something.

JohnyZone is offline   Reply With Quote
Old   #2 (permalink)
 
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Default partner in a 50/50 llc froze joint account and accused me of theft and is slandering me

He wants you out of the management of the business, thats why he has done that as he did not have the guts to tell you that man to man, but decided that slandering you in that way was easier.

He wants you to leave, but he wont dismiss you. He is a totally gutless rag of a man in my view. Dont take this, confront him. Then take legal advice and action as well for the slandering.
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Old   #3 (permalink)
 
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Default partner in a 50/50 llc froze joint account and accused me of theft and is slandering me

if you had actually spoken to 2 attorneys and they know anything they would clearly explain that for it to be defamation he would have to be KNOWINGLY telling lies about you.
if it was a "joint account" and you were legally an equal partner he could NOT have frozen you out of the account...
so there is much more here than you have stated, or you have simply misstated the facts....

now you had no business using the corporate cards for personal items, you should have taken the appropriate draw and used your own money.. what was the point in using the corporate debit card?
it looks and sounds shady and you have some explaining to do.

why should the controlling partner (obviously he is the controlling partner if he did what you claimed) allow a minor partner continue to access funds if there is a question about the ethical or legal manner in which the money is being spent?

whether or not there is a breach is hard to say, there are no relevant details here to support your claim, the defamation will be next to impossible to prove and I seriously doubt any attorney said there was a strong case.....

TALK to your partner and try to resolve his, I doubt the legal system is going to do anything for you.
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Old   #4 (permalink)
 
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Default partner in a 50/50 llc froze joint account and accused me of theft and is slandering me

For several questions on this forum, I've explained till I'm blue in the face why IT IS A MISTAKE TO INTERMINGLE FUNDS WHEN YOU HAVE AN OWNERSHIP INTEREST IN A BUSINESS.

This is a perfect example.

Many people do it because they don't know any better. They pay personal expenses out of a business account, then maybe reimburse the business later, thinking that it's fine. It's not.

People do it because they don't understand the nature of a business entity like an LLC, partnership, or a corporation (I call it "creating Frankenstein" for this reason). You created a next-door neighbor. In the last Presidential election, one of the candidates was ripped in the news media because he compared a corporation to a "person" (the news media didn't understand either, but they're operating as political operatives). An LLC is a "person" from a legal standpoint. The LLC has all the legal rights a person does. The ability to earn money, the ability to spend money, the ability to enter into contracts, the ability to loan money, the ability to lose money. It's an artificial person.

You might not have intended to defraud the company. But think about it. If you had access to your neighbor's checking account for some business reason, would it be O.K. for you to take money out of the neighbor's account to pay your personal expenses, even with the intent of paying it back? Of course not, at least without the express consent of the neighbor.

The LLC has every bit as much right to its money that you as an individual do.

It's called a "fiduciary responsibility." Owners can take loans from business entities, and can loan business entities money, it happens all the time, but they're required by fiduciary responsibility principles to go through the formalities of clearing it with the board and documenting it.

If you can show you had done this before and reconciled the personal expenses paid with a reduced draw, there's a good chance you won't be charged with fraud. There's also a possible argument your partner is defaming you. That's a question for your lawyers to answer.

To anybody reading this, do not intermingle business funds with personal funds, ever. This is one of 100 ways it can come back to bite you in the butt. You could be completely innocent, but it gives someone else an opening to accuse you of theft. It would be like "borrowing" money from the cash register at the grocery store without telling anyone, with the intention of paying it back. Just because lots of people do it (because they don't know any better) does not make it any less dangerous.
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