50% of marriages end in divorce, but that is a better track record than business partnerships. 70% of business partnerships dissolve for reasons other than the retirement or death of one of the partners. Some business partners knew each other as friends before they incorporated a business together, but even that is not a perfect safeguard against deception. However, at least you know your partner well enough to know when he is not acting like his usual self. When someone you have not known for a long time proposes a business partnership, it is best to do your due diligence before legally tying your destiny to theirs. If your business partner has started to show their true colors, and their true colors are not pretty, a San Diego business partnership dispute lawyer can help you get out of the relationship and save yourself.
The 800Xchange Story: A Cautionary Tale
Chris Smith and Edward Shin met as co-workers for a lead generation company in Southern California. They later founded 800Xchange, a lead generation company targeting the debt consolidation industry. While Shin presented a wholesome image, he had a history of financial crime and a gambling addiction. In 2010, Shin diverted a large sum from the company’s accounts and used it to pay court-ordered restitution for a prior criminal conviction of his. Smith confronted Shin, who retaliated by murdering Smith, 33. Shin then led Smith’s family to believe that Smith was sailing around the world; he impersonated Smith in emails to Smith’s family. He also forged Smith’s signature on documents dissolving the company. Shin is currently serving a life sentence for Smith’s murder. Clearly, this is a worst-case scenario, but a dishonest business partner can cause you serious trouble.
How to Build a Business Partnership on a Foundation of Trust
If you were hiring an employee, you likely would conduct a criminal background check. It also makes sense to do one for a prospective business partner. You should ask to see your prospective partner’s recent income tax returns and run a credit score. It is also a good idea to require both partners’ signatures for transactions involving large amounts of money and for any significant business contracts and purchases.
Shady Business Partner Red Flags
The following behaviors should raise suspicion about dishonest behavior by your business partner:
- Your partner refuses to talk about some of their past projects
- Your partner claims to have been involved in a certain business project, but a Google search shows no record of this (even businesses that have been closed for a while often turn up on Google searches)
- Your partner resists your efforts to be organized about record keeping
- Money that your company has earned is unaccounted for
The best time to talk to a lawyer is before things get bad, and if things are already bad, the time to contact a lawyer is now.
Contact Foldenauer Law Group About Disentangling Yourself from a Bad Business Partnership
A business partner dispute lawyer can help you avoid heavy financial losses if you recently found out that your partner is bad news. Contact Foldenauer Law Group, APLC in San Diego, California to discuss your case.