Like any other relationship, sometimes business relationships go bad. And just like in a marriage, the breakup can be friendly or it can be extremely nasty. Your business partner may cheat on you in ways every bit as painful as your spouse. In my years of experience representing business owners, the same patterns keep getting played out again and again when one business partner has decided to take advantage of the others. Here are some of the warning signs.
One owner restricts access to financial information from the other owners. If you are business partners with someone who suddenly or gradually has made it difficult or impossible for you to see the books of the business or know where the money is going, watch out. Typically the first move that dishonest business partners make is to make it difficult for the other business owners to see what is happening with the money. Classic moves by dishonest owners include adding or changing locks on doors or passwords on computers, or firing a bookeeper hired by both of you and replacing her with someone loyal only to the dishonest owner–like a relative.
One owner restricts access to one or more of the best customers of the business. Businesses run on money. The people that control the major sources of income for the company control the business. If you find yourself in a position where you used to interact with all of the main customers of your business, and you find that you now are dealing with only smaller customers, or have been put in charge of getting “new business”, watch out. A common tactic by dishonest business owners is to “freeze out” his business partners from the main customers, or turn those customers against him. The next step may be for the dishonest partner to leave your business and take its main customers with him.
One owner starts claiming that he “does all the work” or “made all the investment”. Business partnerships, like a marriage, don’t work very well when one of the parties feels that the other isn’t pulling his weight. As time goes on, dishonest business partners tend to forget that they agreed on a particular division of labor or investment when the business began. Instead, they start to focus on what they think is unfair about the relationshp now. This attitude leads to dishonesty and theft when one owner starts to take business assets for himself because he thinks he “deserves” more. In many years of handling business cases we have never seen a business owner admit to being dishonest: they always say that they were just trying to get what they should have gotten.
One owner starts to use the business as his personal piggy bank–or as the employer for his family. Another very bad sign is where a business partner begins having the business pay for more and more personal things–typically cars, meals and trips–that aren’t really business related. The effect of this is that the other owners are in effect buying these things for the dishonest owner, and he is therefore getting paid more. Again, the dishonest owner always justifies this to himself by convincing himself that he “deserves” the extra compensation. A similar problem occurs when one business owner puts family members on the payroll. Most businesses have “antinepotism” policies against this for a reason–and the reason is that often the family members perform very poorly if at all and are overpaid. Getting rid of this expensive deadwood is difficult, and the presence of these people is terrible for the morale of your hard working employees. The net effect is that the other owners are once again paying extra compensation to the other owner, and getting nothing but headaches in return.
If you see these kinds of things happening in your business, you should contact a business lawyer and get legal advice today. It is possible that your partner is honest but that things have gotten a little out of hand. It is also possible that your business partner is planning to destroy you, and if that’s the case, you absolutely must know what your options are before you confront him. The cost of a legal consulatation will be nothing next to the cost of starting a fight you are not prepared to fight.