Good morning Debra. You can still form an LLC for this venture, but you'll need your other partner to agree to the terms. But, you have the leverage here, because your verbal agreement is essentially considered legally as a general partnership governed by the state's partnership act since you don't have a signed formal partnership agreement. The reason you have the leverage is because of his misdeeds. Given your facts, you have recourse both from a criminal side and the civil side. On the criminal side, you can prosecute him for embezzlement, fraud, and theft. On this front you would want to contact the district attorney's office as the district attorney's office is where criminal prosecutions are pursued.
On the civil side, you have a cause of action for fraud, misappropriation of company assets, breach of fiduciary duty, breach of contract, as well as several other causes of action. The fraud and misappropriation causes of action will entitle you not only to your actual damages, but punitive damages as well.
To be honest with you, your best alternative here is to pursue this from the civil side. A criminal prosecution requires you to prove intent to not pay you from the beginning and a much higher burden of proof..."beyond a reasonable doubt" versus simply "preponderance of the evidence" on the civil side. And, even if you could get a prosecutor to pursue this, you would then find him likely spending any money he has to defend himself rather than paying you.
But, I would send him a letter by certified mail informing him of the foregoing and demanding he pay you within a short specified period of time or you will have no choice but to pursue this from both the criminal and civil side. That should provide plenty of incentive to comply with your demands; but, if it does not, file your suit and/or contact the district attorney's office. . Even if you have to pursue this further to a suit and/or prosecution, that's likely all you will need do. In my experience, he will settle this quickly thereafter rather than risk punitive damages and criminal prosecution.
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