How Aggressive Should You Be With a Disloyal Business Partner?
by: David C. Roberts of Norris McLaughlin P.A.  -  Business Divorce in NJ
Tuesday, May 30, 2023
Handling Possible Business Partner Betrayal

You may believe that your business partner is up to no good, and you may very well be right. But when faced with such a suspicion, how do you respond? Different people deal with this in different ways. Some make aggressive accusations right from the start. Some express a desire for information, but clearly signal that they don’t want to pick a fight. As with most things, a middle ground approach is often warranted.

If you start out making accusations that you can’t yet back up, that could hurt you in the long run. Obviously, such a tone may not be conducive to an amicable resolution, and you may intentionally choose not to be concerned about hurting your business partner’s feelings. But there is strategy to how you act, as well.

It saves you time, effort, and money on legal fees to try to get as much information as you can without a fight. If you come out full-bore aggressive, you are signaling several things, one of which is that you intend to fight and aren’t backing down. Assuming you are correct, and the majority shareholder really is engaging in improper behavior, you are now signaling that they may have a problem on their hands. In some cases, this may be exactly what you want to do, making an aggressive stance at the outset warranted.

But other times, it may be too easy for your partner to falsify certain documents. In a case like that, you might want to appear less confrontational and see if you can tease out certain information. In one case, we got the majority shareholder to admit there was a second set of books, because the majority shareholder acted curious and helpful. Asking about how he keeps taxes so low from their “common enemy” - the IRS - caused his partner to be more open than he had been in the past. My client was then able to copy the real books, giving us the documents that the valuation should be based on.

Of course an approach like this won’t always work. A business partner who is stealing from you is unlikely to admit it under any circumstances. But sending an accusatory email with no strategy behind it is not likely to accomplish much. As always, consulting with a shareholder dispute attorney ahead of time can help you prepare your case from day one.

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