Protecting your business from a partner’s fraudulent activities can feel overwhelming. These actions can harm your company’s finances and reputation, and lead to financial ruin.
Knowing how to act and what steps to take can help protect your interests and mitigate further harm.
Understand the legal options available
Business owners have legal remedies when a partner engages in fraudulent activities. The Texas Business Organizations Code allows businesses to pursue legal action for breaches of fiduciary duty or fraud. This includes filing a civil lawsuit to recover damages caused by the fraudulent behavior. Reviewing your company agreement can also clarify the steps for handling disputes and fraud.
Consider removing the partner
If fraud occurs, you may consider removing the partner from the business. Many company agreements include terms for addressing misconduct. These terms often outline the process for expelling a partner. If your agreement does not include such provisions, Texas law provides mechanisms to dissolve or restructure the company in cases of fraud or misconduct.
Conduct a thorough investigation
Gathering evidence is essential to protecting your business. This includes documenting all fraudulent activities and reviewing financial records for discrepancies. Hiring forensic accountants or experts may help uncover hidden actions that harm your company. Accurate documentation strengthens your case if legal action becomes necessary.
Safeguard company assets
Fraudulent partners may attempt to misuse business assets for personal gain. You can protect your assets by securing bank accounts, restricting access to sensitive information, and implementing internal controls. These actions can help prevent additional losses while resolving the issue.
Move forward with a clear strategy
Addressing fraud in a partnership requires decisive action and careful planning. Understanding your legal rights under Texas law and taking proactive steps to protect your company can preserve its future.