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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 36175
Experience:  Retired (mostly)
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I have been a partner in a small business since late 2007.

Resolved Question:

I have been a partner in a small business since late 2007. Recently my partner has begun acting strangely. On June 10 without any notice, he changed the locks on the small office we use in a building on his property, locking me and our secretary out. He announced to her that he "needed to take care of himself" and that I should run the business. However, he has refused to talk to me since then and has refused to allow me access to all of the company records. He has turned over some, but not all. I am aware that he has opened some charge and bank accounts in the company name but using them more for his personal wishes. I am willing to "forgive" the financial stuff, at least for now as it is probably only a few thousand dollars, not tens or hundreds of thousands. I'm trying to keep the business operating since we have 5 part-time workers who have been doing their jobs and customers calling us. I have spoken to a local lawyer who says I'll have to put the company under a court-appointed trustee to gain access to the accounts (that were opened without my knowledge or signature) and compel my partner to turn over the books. I think those types of court costs will quickly suck what few assets we have dry and leave the firm unable to do business. I've tried being nice for a month, but I'm approaching the point where I can't proceed. Do I have any legal options that you can suggest short of putting the company into receivership? I should note that I've suspected financial mismanagement for some time since, but he's been the more active partner and I've "trusted" him. I think part of the reason he suddenly changed the locks was that I came to the office and downloaded a copy of the Quickbooks files from his laptop. He had always kept those to himself.
Submitted: 2 years ago.
Category: Business Law
Expert:  socrateaser replied 2 years ago.

Who has signing authority of the principal bank accounts?

Whose name is/are on the building lease?

Customer: replied 2 years ago.

Both partners had signing authority on the initial bank accounts. The other partner opened additional accounts without informing me and those accounts have only his signature.

The building lease is verbal. There is no written agreement.


There is also no written partnership agreement beyond the LLC incorporation documents filed with the NC Sec of State and the documents covering the franchise agreements we have covering our affiliation with the national firm we represent in this area.

Expert:  socrateaser replied 2 years ago.
Sorry for the delay (Saturday night and all that).

Here's the botXXXXX XXXXXne. You could spend a small fortune to file a petition for a dissolution of partnership and to appoint a receiver, etc. Or, you could just walk into the bank tomorrow morning, open an new business account without your partner's name on it, transfer all of the working capital into that account, notify your vendors and/or creditors of the new account (assuming any make direct deposits or withdrawals.

And, then you meet with your partner and you say, "Time for full disclosure. Either you tell me exactly what's going on, and we straighten out everything right now, or we are done, and we can either negotiate a voluntary dissolution of the business, or you can sue me to recover your share of the business. Because from what I can see, you appear to be stealing from the business, and I'm not going to let that continue.

Also, you could hire a locksmith to change the locks on the doors that your partner has already changed, so that you can get to the business records.

Usually, the partner who starts playing games has sole control over the business accounts, and the leases, and he/she simply "fires" the other partner by refusing any access to anything. But, you're not in that circumstance. You can stop this thing dead in its tracks without spending any money on legal expenses. Yes, it's likely that you will have those expenses going forward. But, you may be able to shock your partner into "spilling his/her guts," and if you can, then maybe you can either save the business or end it in a reasonaby civil manner without a $50,000 lawsuit.

Hope this helps.
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 36175
Experience: Retired (mostly)
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