If a business partner spend business money on obviously personal items, can I take him to small claims court to get the money back?

If I started a business with a partner, opened a business checking account in the business name with myself and my partner as signators on the account, can I take him to small claims court and for spending money on obviously personal items like thousands on jewelry for his girlfriend? The money in the account was from a real estate loan to work on apartments we had purchased. The personal items he bought are plainly listed on the bank statement with his card number.

Asked on June 8, 2012 under Business Law, Kentucky


EMMANUEL SOCKS / Socks Law Associates, PLLC

Answered 8 years ago | Contributor

There must be ways of dealing with such acts internally, based on company regulations in the by-laws. Courts would not want to intervene in something that is part of someone's business judgment as an owner or executive. What appears to be the solution, based on what little information you have above, is to treat the personal expenditure as a withdrawal by a partner/member. Remove from expenses and debit the capital account for the partner/member.

If you want to sue in Court, will that be based on a breach of duty claim? What procedures do you have in place? Seek an attorney to help you flesh out the claims you can have, if any, and to put procedures in place to prevent recurring acts.

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