When a Business Partner Steals, What Is the Claim Called in Florida?

What Is It Called When a Business Partner Steals?

There is no single legal name for every case. When a business partner takes money, property, or clients, the conduct is usually called embezzlement, theft, conversion, or misappropriation. The claim is often filed as breach of fiduciary duty. Which label fits depends on the facts.

The label turns on what was taken and how. Money, equipment, customer lists, and trade secrets each raise different questions. A partner who controlled company funds is in a different position than one who simply took something without permission.

This page is general information, not legal advice. Your own facts and any written partnership or operating agreement shape how the conduct is classified. Kristina E. Wilson is the attorney responsible for this page. KEW Legal has offices in Coral Gables and Sunny Isles Beach.

Embezzlement, Theft, and Conversion: How the Terms Differ

Embezzlement describes a person who was trusted with a business’s money and used it for their own purposes. A partner with control of bank accounts, payroll, or invoicing is the typical example. The key fact is that the money was entrusted to them.

Theft is the everyday word for taking property that belongs to someone else without permission. People often use it for cash or equipment that was simply removed.

Conversion is a civil term for wrongfully taking or controlling property that belongs to someone else. Lawyers often use it alongside embezzlement when they describe a lawsuit. The name matters less than the facts: who owned the property, who was entitled to it, and what happened to it.

Misappropriation means using company money, opportunities, or secrets for personal gain. For trade secrets, Florida law defines misappropriation in § 688.002. Improper means include theft, bribery, misrepresentation, and breach of a duty to keep something secret. A trade secret is information that is not generally known, has economic value, and is protected by reasonable secrecy efforts.

Breach of Fiduciary Duty: The Duty of Loyalty a Partner Owes

A partner who takes business profit for themselves can breach the duty of loyalty. Florida’s partnership statute says the only fiduciary duties partners owe each other are loyalty and care. § 620.8404 sets out both.

The duty of loyalty requires a partner to account for and hold as trustee any property, profit, or benefit gained from the partnership’s business or property. That includes taking a partnership opportunity for themselves. A partner also must not deal with the partnership for a party with an opposing interest. A partner must not compete with the partnership before it dissolves.

The duty of care is narrower. It bars grossly negligent or reckless conduct, intentional misconduct, and knowingly breaking the law.

Florida also limits this claim. A partner does not break a duty just because the conduct helps the partner’s own interest. Partners must still act in good faith and fair dealing. That is why the facts matter. The partnership agreement can also change the analysis, so it belongs in the review.

Trade Secret Claims and Deadlines Under Florida Law

Owners whose trade secrets were misappropriated can seek money damages under Florida law. § 688.004 allows recovery of actual loss and unjust enrichment caused by misappropriation. For willful and malicious misappropriation, the court may award exemplary damages up to twice the award.

Timing matters. § 688.007 requires a trade secret misappropriation action within 3 years after the misappropriation is discovered, or should have been discovered with reasonable diligence. A continuing misappropriation counts as a single claim. Because the clock runs from discovery, waiting to act can cost time.

Florida also makes it unlawful to obtain or use a trade secret without authorization, with intent to deprive the owner of its benefit or to use it for one’s own purposes. § 812.081 also lets an owner sue to stop continued improper use.

Can a Business Partner Take Money Without Permission?

Generally, no. Florida’s partnership statute says a partner may use or possess partnership property only on behalf of the partnership. § 620.8401 sets that rule. Having access to a bank account does not give a partner permission to use the money personally.

Authority depends on the type of decision. Ordinary business matters can be decided by a majority of partners. An act outside the ordinary course of business needs the consent of all partners. A partner is also not entitled to pay for services to the partnership, except reasonable compensation for winding up. A partner who pays themselves without approval may be breaking these rules.

The key question is whether the withdrawal was permitted, documented, and disclosed. A draw approved under the agreement is different from transfers hidden in the books.

In an LLC, the rules differ. A member who consents to an improper distribution may be personally liable to the company under § 605.0406. That action must start within 2 years after the distribution. For general background on how Florida business entities are registered and identified, see the Florida Division of Corporations.

Why Partners Embezzle, and What Sabotage Is Usually Called

Sabotage is not a single legal term. When a partner damages the business on purpose, the conduct is usually described through the duty of loyalty. Florida’s loyalty rules bar a partner from appropriating a partnership opportunity and from competing with the partnership before it dissolves. § 620.8404 sets out those limits.

In general terms, a partner who controls bank access, payroll, or financial records, with little review by others, has more chance to take funds unnoticed. Florida also gives partners access to the books. A partnership must allow partners to inspect and copy its books during ordinary business hours. § 620.8403 sets out that right.

Diverting clients or vendor deals to a new company is one example of sabotage. The same conduct can support more than one theory. The right name turns on what you can document.

What to Write Down Now, and Talking With KEW Legal

Start by keeping records that show what happened and when. Useful items include bank statements, general ledger entries, emails and messages with the partner, the partnership or operating agreement, and a dated log of what you noticed. The goal is to preserve what already exists.

If the partnership winds up, each partner is entitled to a settlement of all partnership accounts. A partner who owes the partnership must contribute the excess of charges over credits. § 620.8807 addresses that settlement.

KEW Legal serves business owners and investors across Miami-Dade and South Florida as outside general counsel. Its partnership dispute work covers conduct like the examples on this page. The first consultation is free, confidential, and carries no obligation to continue. To talk through your facts, call 305-990-2300 or use the contact form.

Is there one legal name for a business partner who steals?

No. Embezzlement, theft, conversion, misappropriation, and breach of fiduciary duty are the names most often used, and more than one can apply.

Can a business partner who steals be sued personally?

In an LLC, a member who consents to an improper distribution may be personally liable to the company. The partner’s own conduct and the governing agreements decide the rest.

What is it called when someone sabotages a business?

There is no single name. The conduct is usually described through the duty of loyalty, such as competing with the business before it ends.