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J.Hazelbaker
J.Hazelbaker, Attorney
Category: Business Law
Satisfied Customers: 4385
Experience:  Experienced and trained in the area of business law.
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Good morning....... Quick question. Can you legally withdraw

Resolved Question:

Good morning....... Quick question.

Can you legally withdraw money earned and placed in one business account in one bank, into an account in another bank under another business name - a business that exists in name only - it doesn't operate anymore........ If it's against the law, could you site the statute please. Thank you.
Submitted: 2 years ago.
Category: Business Law
Expert:  J.Hazelbaker replied 2 years ago.

J.Hazelbaker :

Hello. Thank you for using JustAnswer.

J.Hazelbaker :

The transaction you describe is legal as long as you have authority under the business entity from which the money is being withdrawn to withdrawn those funds.

J.Hazelbaker :

For example, if it is a single member LLC and you are the sole member, or it is your sole proprietorship, then there would be nothing wrong with a transfer of this nature.

J.Hazelbaker :

Please let me know what follow-up questions you have. If my above responses have been helpful, please click Accept so that I get credit for the time/effort. You may always restart the thread and ask follow-up questions at any time by clicking the “Reply” button at the bottom of the question/answer thread. You can access this thread later in your profile under the “My Questions” tab.

Customer:

Thank you.... She is a partner in another business and has access to that account, but maintains this account as well. It's not an operating business - just in name only.... So it's legal?.....Thanks

J.Hazelbaker :

The act of the transfer from one account to the other, with authority is legal. The question will be what is the intent of the person making the withdraw.

J.Hazelbaker :

If the money is being placed in the non-operating business for a legitimate business purpose (e.g. to resume operations, cover debt, etc.), then the intent would be legal.

J.Hazelbaker :

If the intent was otherwise, then there could be an issue.

J.Hazelbaker :

But, to the original, fundamental question, no worries.

Customer:

Both businesses are within the same bank. So her partner just transfers funds from their partnership account into this other account. She's using this other account as her own personal account. If there is nothing wrong with doing so, I appreciate you time and expertise.......and good morning......working on a Saturday huh.......thank you again.

J.Hazelbaker :

The more detail you can add about the intent of the transaction, the more worry can be added.

J.Hazelbaker :

The withdrawal of the money would be a breach

J.Hazelbaker :

of fiduciary duty if it were taken out without a legitimate business purpose.

Customer:

Would be a breach?

Customer:

No business purpose and she and I use to be partners in her business, but then we seperated and I'm not on the account. Thought the business was dissolved.

J.Hazelbaker :

I see.

Customer:

You have my curiosity up....... Would she have to be withdrawing money from that account for business reasons and not using it as a regular old personal account?

J.Hazelbaker :

There really isn't any issue with the deposit in the second account. The main issue is the withdrawal of the funds from the first account.

J.Hazelbaker :

Again, the taking of this money (without regard to where it was eventually placed)

J.Hazelbaker :

could be a breach of fiduciary duty or, even, embezzlement

Customer:

The transfer from the first account is sort of her payment of the profits from the business.

Customer:

No - she isn't doing anything illegal with the first account. Just didn't think she could be using a business account as a personal account.

J.Hazelbaker :

O.K. As long as she is entitled to those funds, the deposit in the second account really isn't a wrongful act. She may be doing it to avoid reporting the income to the IRS.

J.Hazelbaker :

Which would be illegal, but the use of the account where she is an authorized user is not a legal issue.

J.Hazelbaker :

Not real smart though.

Customer:

Good point....... I'm a little bitter towards her right now.....sorry....

J.Hazelbaker :

No problem.

J.Hazelbaker :

You could file an IRS information report, if you think she is doing it to avoid reporting the income on taxes.

Customer:

Thanks again - what would I request from the IRS?

J.Hazelbaker :

http://www.irs.gov/compliance/article/0,,id=180171,00.html

Customer:

Thank you again......

J.Hazelbaker :

If it turns out well, you could get 30%

J.Hazelbaker :

You are welcome. Good luck.

Customer:

How could that happen

J.Hazelbaker :

Please let me know what follow-up questions you have. If my above responses have been helpful, please click Accept so that I get credit for the time/effort. You may always restart the thread and ask follow-up questions at any time by clicking the “Reply” button at the bottom of the question/answer thread. You can access this thread later in your profile under the “My Questions” tab.

J.Hazelbaker :

Check the link

Customer:

How could I get 30% - please,

J.Hazelbaker :

If you report to the IRS and they find out you are right and the recover money, you can get 30% of what they recover.

Customer:

Oh...... OK..... Question: since we were both partners in this business that she still maintains the name for and the business has not been disolved, would I be entitled to any of the funds? I know - getting greedy.......

J.Hazelbaker :

Sure. You could make a claim, since the business is not dissolved.

Customer:

Interesting........

Customer:

I would have to persue that through the court?

Customer:

pursue?

J.Hazelbaker :

Yes. Unless you are on the bank account.

J.Hazelbaker :

But now that she has deposited the money, there are bank records. She'd have a hard time explaining how that was the partnership's money, but that she was entitled to all of it.

Customer:

Nope - not on the account..... Not a chance of that happening. Will go through the court. Is it still a business even though it has no operation? All invoices are from the other business.

J.Hazelbaker :

Unless and until the business is dissolved, it is still an existing legal entity, whether full operation or not.

Customer:

OK - great - thank you again - I've taken up a lot of your time - thank you for speaking with me!!!

J.Hazelbaker :

No problem. Let me know if follow-up questions arise later.

Customer:

I will - have a great weekend!

Customer:

Great advice

J.Hazelbaker :

Please let me know what follow-up questions you have. If my above responses have been helpful, please click Accept so that I get credit for the time/effort. You may always restart the thread and ask follow-up questions at any time by clicking the “Reply” button at the bottom of the question/answer thread. You can access this thread later in your profile under the “My Questions” tab.

J.Hazelbaker, Attorney
Category: Business Law
Satisfied Customers: 4385
Experience: Experienced and trained in the area of business law.
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