Business Partner Stealing Money? What to Do First in Texas

Last updated: October 12, 2026

If you suspect your business partner is stealing, you likely have two questions: Is this a crime, and how do I get the money back? In Texas, the answer to the first is often yes – even when the person taking the money owns part of the company. The answer to the second depends on how your business is set up, what your governing documents say, and how quickly you act.

Whether your business is an LLC, a corporation, or a partnership, a co-owner who takes business money or property for personal use without authorization is taking something that isn't theirs. The business is its own legal entity. Owning half of it doesn't make its bank account yours.

Common Types of Business Partner Theft

Partner theft rarely looks like one large withdrawal. It usually builds slowly, hidden inside routine transactions. The most common forms include:

• Embezzlement – taking money the partner can access but doesn't own, such as skimming cash receipts, paying fake vendors, or moving funds to personal accounts
• Unauthorized compensation – raises, bonuses, loans, or distributions the other owners never approved
• Personal expenses on company accounts – credit cards, vehicles, travel, or relatives on the payroll who rarely work
• Fraud – falsifying financial statements or misleading co-owners to get them to invest more or approve a deal
• Diverted opportunities – steering clients, contracts, or deals to a separate business the partner owns
• Stolen intellectual property – taking customer lists, pricing, formulas, or other trade secrets, which the Texas Uniform Trade Secrets Act protects

Even a partner who believes they're entitled to the money can be liable if they take it outside the approval process in your company agreement, partnership agreement, or bylaws.

Warning Signs Your Business Partner Is Stealing

Compare what you're seeing with these common red flags:

• Refusing to share financial records, or delaying reports again and again
• Changing passwords or taking sole control of bank accounts and accounting software
• Cash shortages or shrinking margins with no business explanation
• New or unfamiliar vendors, especially ones tied to the partner's family or friends
• Relatives on the payroll at high salaries who rarely show up
• Different versions of the same financial records
• A lifestyle that outpaces the partner's distributions – new property, luxury purchases, or outside investments

One warning sign doesn't prove theft. Several together are reasons to start documenting what you see – and to talk to an attorney before you confront your partner.

Can a Business Partner Be Charged With Embezzlement in Texas?

Yes. Texas doesn't have a separate crime called embezzlement. Prosecutors charge it as theft under the Texas Penal Code, and owning part of the business isn't a defense. Because an LLC or corporation is a separate legal entity, a co-owner who takes its money without consent can be charged with stealing from it.

The offense level depends on how much was taken:

When money is taken in one scheme or an ongoing pattern, prosecutors can add the amounts together, which can raise the charge.

In practice, a criminal case and a civil case run on separate tracks. The district attorney decides whether to file charges, and a conviction doesn't automatically return your money. A court can order restitution, but recovering what was taken – and protecting the business in the meantime – usually takes a civil lawsuit.

Hendershot Cowart P.C. does not handle criminal matters. If you are considering involving law enforcement, we can refer you to an attorney who handles criminal and white-collar matters to help you decide whether and when to take that step.

Here’s what we can do: handle the civil side of the dispute – pursuing what was taken and protecting your ownership stake through the civil legal options described below.

Can You Sue Your Business Partner for Stealing?

Yes. Most partner theft cases combine several claims, because each one carries different remedies:

• Breach of fiduciary duty: Partners in a general partnership owe each other duties of loyalty and care under Texas partnership law, and Texas courts have described a managing partner's duty as the highest the law recognizes. In LLCs and corporations, managers, officers, and directors owe duties to the company, and the company agreement can shape them. Taking company money for personal use is a textbook breach. Learn more about breach of fiduciary duty claims.
• Civil theft: The Texas Theft Liability Act lets you sue anyone who commits theft as the Penal Code defines it. You can recover your actual losses, up to $1,000 in additional damages, and your attorney's fees.
• Conversion: This claim covers wrongfully taking or keeping property, including company funds that an officer takes and never accounts for. It's often paired with civil theft.
• Fraud: If your partner lied about the finances or hid facts to cover the theft, you may have a fraud claim, which can support exemplary damages (damages meant to punish, not just repay).
• Breach of contract: Most company and partnership agreements limit compensation, distributions, and deals with related parties. Taking money in violation of those terms is a breach.
• Federal civil RICO: In rare cases involving a pattern of wire or mail fraud, federal racketeering law allows triple damages. Courts scrutinize these claims closely.

The catch with civil theft: the Texas Theft Liability Act awards attorney's fees to the person who wins – on either side. In Agar Corp. v. Electro Circuits International, LLC (2019), the Texas Supreme Court confirmed that a defendant who defeats a theft claim is entitled to fees. If your evidence is thin, a theft claim can backfire. That's one reason to build the financial record before you file.

Who Can Sue: You or the Business?

Theft from a company injures the company first, so the claim generally belongs to the business, not to you personally. The Texas Supreme Court set this rule in Wingate v. Hajdik (1990): an owner can't personally recover for a wrong done only to the business, even when the owner's stake loses value. Partnerships follow a similar rule.

That means you'll often bring a derivative lawsuit (a suit filed on the company's behalf, with any recovery going to the company). When the partner who stole controls the business, you may be the only one in a position to file it.

Texas makes this easier for small businesses. In a closely held corporation – fewer than 35 shareholders and no public trading – the usual procedural hurdles for derivative suits, such as a written demand and a waiting period, don't apply. LLCs with fewer than 35 members get similar treatment when one owner sues another owner or manager for harming the company.

In these closely held cases, a court can also treat the suit as a direct claim and award damages to the owner who sued rather than the company, if fairness calls for it. That matters when sending the money back to the company would put it right back under your partner's control.

What You Can Recover When a Business Partner Steals

Depending on the claims and the evidence, a Texas court can order:

• Repayment of what was taken, plus other actual damages
• Exemplary damages, when the conduct was fraudulent, malicious, or grossly negligent
• Attorney's fees, under the Texas Theft Liability Act, a fee provision in your agreement or, in some derivative suits, when the case benefits the company
• An accounting – a court-supervised tracing of where the money went
• A constructive trust over stolen funds or property bought with them, so the court can order that property returned to the business. This works best when the money can be traced to specific accounts or purchases.
• A temporary restraining order or injunction to stop ongoing theft, freeze transfers or restore your access to records
• A receiver to take control of the business, though Texas courts grant this rarely; in Spiritas v. Davidoff (2015), the Dallas Court of Appeals described receivership as an extraordinarily harsh remedy
• Winding up the business, when the misconduct makes it no longer reasonably practicable to operate together

What you usually can't get is a court order removing your partner. Unless your company agreement or partnership agreement provides for removal or a forced buyout, the remedy for theft is generally money damages, not expulsion – even in a 50-50 company. Your governing documents may give you more options than the law does on its own.

What to Do First If You Suspect Your Partner Is Stealing

The first few weeks often decide how much you can recover. Here's how the process typically works:

1. Preserve the evidence. Download bank statements, accounting records, invoices, and emails you have a right to access, and keep copies outside any system your partner controls.
2. Talk to an attorney before you confront your partner. A confrontation can lead to deleted records, drained accounts, or a lockout.
3. Demand the books and records. Texas law gives LLC members, shareholders, and partners the right to inspect company records. A formal written demand creates a paper trail, and a refusal can become evidence of its own.
4. Bring in a forensic accountant. Partner theft usually hides in routine transactions. A forensic accountant can trace the money and calculate the loss in a form a court will accept.
5. Check your governing documents. Your company agreement, partnership agreement, or bylaws may require mediation or arbitration, set removal or buyout terms, or limit who can sign checks and move money.
6. Act quickly if money is still leaving. Your attorney can ask a court for a temporary restraining order, sometimes within days.
7. Watch the deadlines. Texas generally allows four years to sue for breach of fiduciary duty or fraud, but only two years for conversion and civil theft. Depending on the facts, the clock may start when the money was taken, not when you found out.

Here's what not to do:

• Don't take money from the company to even things out. Self-help can expose you to the same claims you're bringing.
• Don't lock your partner out of accounts or systems without legal guidance. It may breach your agreement or your own duties to the business.
• Don't alter, delete or hide records – even ones that seem to hurt your position.
• Don't log into your partner's personal email or accounts.
• Don't threaten criminal charges to pressure repayment.

Frequently Asked Questions

Can my business partner withdraw funds without my consent?

It depends on your governing documents. Many company and partnership agreements let a manager or managing partner handle day-to-day spending but require the other owners' approval for distributions, raises, loans, or payments to related parties. Even where the agreement is silent, a withdrawal for personal benefit that the other owners didn't approve can still breach a fiduciary duty.

What happens if my partner files for bankruptcy?

Debts that arise from embezzlement or from fraud by someone acting as a fiduciary generally can't be wiped out in bankruptcy. But you usually have to object to the debt being discharged, and the deadline is short. Contact an attorney as soon as you receive a bankruptcy notice.

What type of lawyer do I need?

A business litigation attorney who regularly handles partnership and shareholder disputes. These cases combine overlapping claims, and the right strategy depends on your entity type, your governing documents, and the evidence available. Look for someone who can secure records quickly, work with forensic accountants, and judge whether negotiation, mediation, or a lawsuit fits your goals.

Protect the Business Before More Money Leaves

Every partner theft case turns on the paper trail: what your governing documents allow, what the bank records show, and how quickly you act. The longer theft continues, the harder the money is to trace and the fewer options you have.

Hendershot Cowart P.C. has represented Texas business owners in partnership and shareholder disputes since 1987. Because we also draft company and partnership agreements, we know what to look for in yours – the clauses that protect you and the gaps your partner may try to use. We'll explain your options in plain English and tell you what the first step costs before you commit.

Call (713) 783-3110 or contact us online for a confidential consultation.