If your business partner is taking money from the company without authorization, you may be able to demand records, restrict future transactions, pursue repayment, seek emergency court relief, or bring claims on behalf of the company.
But the first step is determining what actually happened.
Not every questionable withdrawal is legally theft. The payment could be compensation, a distribution, reimbursement, repayment of a member loan, or another transaction the partner was authorized to approve.
The real question is whether the payment was permitted by the operating agreement, company approvals, and the partner’s authority.
Start With the Operating Agreement
The operating agreement should establish how company money can be used and who has authority to authorize transactions.
Relevant provisions may address:
- Member and manager compensation
- Owner distributions
- Reimbursement of expenses
- Loans to members
- Related-party transactions
- Signing authority
- Spending limits
- Voting requirements
- Access to financial accounts
- Conflicts of interest
A payment that appears improper may be allowed under one of these provisions. The reverse is also true: a partner may have access to the bank account without having legal authority to use company funds for personal purposes.
Access is not the same as authorization.
Bank permissions determine what a person can physically do. The operating agreement and company approvals help determine what that person is legally permitted to do.
Preserve the Financial Evidence
Suspicion is not enough to establish what occurred.
Before confronting the partner or making accusations, preserve the records needed to reconstruct the transactions.
Those records may include:
- Bank and credit-card statements
- Canceled checks
- Wire-transfer records
- Accounting ledgers
- Expense reports and receipts
- Payroll records
- Tax filings
- Member loan documents
- Emails and text messages
- Written consents and meeting minutes
Download available records before access changes. Preserve them in their original form when possible, and do not alter company books to “correct” the issue without documenting the original entries.
The goal is to determine where the money went, who approved the transaction, how it was recorded, and whether similar payments occurred previously.
One unexplained charge may be an accounting mistake.
A pattern of disguised payments is a different problem.
Texas LLC Members May Have Inspection Rights
A partner controlling the company’s finances may refuse to provide records or claim that another member has no right to see them.
Texas law generally requires an LLC to maintain specified books and records. Under Texas Business Organizations Code § 101.502, a member or an assignee of a membership interest may submit a written request stating with reasonable particularity the purpose and records requested.
The inspection demand should be specific.
A request for “all company documents” can generate an argument about scope. A focused demand identifying bank statements, general ledgers, compensation records, distributions, and transactions involving the partner is more useful.
The operating agreement may provide additional procedures or rights. It should be reviewed before the demand is sent so that the request complies with the company’s governance structure.
Refusal to produce records does not prove misuse.
But it can become an important part of the dispute.
Avoid an Immediate Retaliatory Lockout
When an owner discovers a suspicious transaction, the instinct may be to change every password, empty the account, terminate the partner, or announce that the partner has been removed from the company.
Those actions can create additional claims if they are not authorized.
A member generally cannot remove another member, seize that member’s ownership interest, or eliminate voting rights simply because misconduct is suspected. The authority to remove a manager, restrict account access, or approve emergency controls depends on the operating agreement, certificate of formation, bank documents, and applicable law.
Reasonable protective measures may still be necessary.
Depending on the company’s governance structure, those measures might include transaction alerts, dual-approval requirements, temporary spending limits, preservation notices, or revocation of access through an authorized company action.
The response should protect company assets without creating a second governance violation.
Determine Who Actually Owns the Claim
If a partner takes money belonging to the LLC, the primary injury is often suffered by the company.
That matters because a member cannot always recover personally for an injury belonging to the entity. The claim may need to be brought derivatively—that is, by a member acting on behalf of the LLC.
Texas provides procedures for derivative proceedings involving LLCs in Sections 101.451 through 101.463 of the Business Organizations Code. Those provisions address matters including standing, demands, control of the litigation, and closely held LLCs.
A direct claim may exist when the partner violated a duty owed specifically to the individual member, such as breaching a contractual payment obligation or making a fraudulent statement directly to that member.
The distinction affects who brings the claim and who receives any recovery.
If company money was taken, a recovery may belong to the company rather than being paid directly to the complaining owner.
The Available Claims Depend on the Relationship
Potential claims may include breach of the operating agreement, breach of fiduciary duty, fraud, conversion, an accounting, or requests for declaratory and injunctive relief.
But the labels should not be assumed.
The Supreme Court of Texas has explained that LLC members do not owe formal fiduciary duties to one another merely because they are co-members. Whether a duty exists may depend on the person’s role, the operating agreement, the relationship between the parties, and whether the claim is being asserted for the company. See Bertucci v. Watkins.
That distinction is important.
A manager entrusted with company funds may have obligations to the LLC even when the manager does not owe the same duty directly to another member.
The conduct and the company structure must be analyzed together.
Emergency Relief May Be Available
If money is actively disappearing, waiting until the end of a lawsuit may leave nothing to recover.
In appropriate circumstances, a court may be asked for temporary injunctive relief intended to preserve accounts, records, or other company property while the dispute proceeds. Obtaining that relief generally requires evidence of an imminent, irreparable injury and compliance with specific procedural requirements.
More severe remedies may also be considered when the company can no longer function.
Under Texas Business Organizations Code § 11.314, a district court may order winding up of an LLC under limited circumstances, including when another owner’s conduct makes it not reasonably practicable to continue the business with that owner or when the company cannot reasonably operate in conformity with its governing documents.
Judicial winding up is not a routine remedy for every financial disagreement.
It is a last-stage remedy when the company’s structure has materially broken down.
Separate the Business Problem From the Personal Conflict
Financial disputes between business partners become personal quickly.
That emotion can make every transaction look malicious and every response feel justified.
The stronger approach is structural:
Identify the transaction.
Determine the authority.
Preserve the evidence.
Protect the remaining assets.
Then decide whether the proper response is an accounting correction, repayment demand, governance action, negotiated separation, buyout, or litigation.
When company money is involved, speed matters.
But precision matters more.