It’s difficult to answer this question. There are too many variables, including the ones listed below. We strongly encourage you to talk to a business lawyer or corporate counsel immediately if you suspect your business partner is engaged in any illegal acts. You could be liable for your business partner’s fraud in some cases but consider the following points.
Type of Business Entity
What kind of business relationship do you and your business partner have? Some business entities offer protections that could prevent or minimize your liability.
- Corporation. The owners of a corporation generally have limited liability for the corporation’s actions.
- Limited Partnership. In this type of partnership, the limited partners have limited liability. However, the general partner does not enjoy the same protections. If you are the general partner in a limited partnership, contact an attorney if you notice a business partner’s fraud.
- General Partnership. Each partner in a general partnership can be held responsible for the company’s debts and obligations. This liability could include a business partner’s fraud.
- Limited Liability Partnership. Often this type of business is composed of doctors, lawyers, CPAs, or other professionals. In a limited liability partnership, each partner is liable for their actions.
In some cases, you may not be held liable for your business partner’s fraud because of the type of business you own. However, never assume you are safe without getting experienced legal advice.
Other Questions to Consider
Depending on the type and extent of your business partner’s fraud, you may need to ask yourself a few questions:
- Did you or your business profit from your business partner’s fraud?
- Whom did the business partner defraud?
- Did your colleague commit state and/or federal crimes?
- How long have you suspected fraudulent activity?
Again, the answer to a question like this is very dependent on the facts of the situation. Please contact an experienced business lawyer immediately.
What to Do if You Suspect a Business Partner’s Fraud
As we mentioned, you need to speak to an attorney. That said, there are things you can do if you suspect fraud.
- Document everything.
- Quietly and discreetly gather evidence.
- Consider ways to protect the business and yourself.
- Refrain from making any accusations until you have talked with a lawyer.
It’s important to have proof of your business partner’s fraud. However, make sure you don’t do anything illegal or unethical to get that proof. Spying on your partner could violate laws like Florida’s wiretapping law.
Call to Discuss Your Liability for a Business Partner’s Fraud
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.