Ask HN: Misuse of corporate funds in a small business

It sounds like its not quite to the point where it needs to escalate to the steps you're talking about in terms of buying him out, and this could be solved with a quick 15-minute company meeting about use of the company card/funds. Maybe there's something deeper there like he's having financial trouble that needs to be addressed. Or maybe he's just really bad with money, in which case maybe you should suggest someone else hold onto the company card.

I think as a whole, our culture is too quick to jump to getting lawyers involved, when you should at least try giving just talking to him a second shot. Even if you get lawyers involved and take care of taking him out of the company cleanly from a legal point of view, it's definitely going to be a HUGE distraction and morale killer to have a founder leave.

If he is not communicating, then perhaps put a hold on or cancel the company credit card he carries? I'd only do this if he is avoiding you while continuing to use the card for person expenses. What do your other founders think about this? Are they willing to cut him more slack than you? Are you over reacting? Hard to tell with out more details, but I would push to resolve the issue quickly.

What you have now is the situational equivalent of the Kubler-Ross stages of death. Your brain needs to cope with this. Your brain isn't coping yet.

What you do next will affect your future. Not because of this thief. Because your action will demonstrate to yourself that you can be jerked around and you will let people steal from you. OR NOT.

I had an employee embezzle from me. Not exactly the same but similar. I was ashamed and embarrassed. I'm a tax lawyer FFS. I should be smarter than that.

I had her arrested. It was time to stand up for myself. I suspect it is time for you to stand up for yourself.

Your company may be dead as a result of this. You don't have total control over that result. Your next business will do well if you insist that you be treated honorably and not be stolen from. As soon as you're willing to let _this_ company die for reasons beyond your control, you'll take action. Because you already, in your heart, know what to do.

There may or may not be ways to evict him and keep the company going. Don't hold onto this company at all costs. But do stand up for yourself here. If you don't the wheel will come around again and someone else will steal from you. And again until you insist that it stop. Then it will.

Then, set up a policy requiring 2 people to sign for all purchases, and pay for things by company check only. Establish a formal expense reimbursement process. You can probably get an accountant or bookkeeper to help you set this up.

If this person was initially a friend and productive, and suddenly started behaving differently, there are three possibilities.

1) He was always a bad person, and you just didn't notice.

2) He has given up on the company for some reason related to the company, and is being passive-aggressive, plus inherently somewhat dishonest.

3) He is having personal financial/emotional/etc. problems.

Not sure how you would determine which of the above it is, or how best to respond.

I've had embezzlement happen at a company I owned, and it ended up killing the company (the scale of embezzlement was high, and it wasn't a normal tech company). Ultimately, the problem is a lack of process/controls, adequate enforcement and supervision, and hiring immoral people. As a result, I am much more cautious with all of those things now.

I think you're more doomed due to lack of founder vesting than anything else.

Also, from a tax standpoint, your business will need to account for his expenditures. Depending how how he's spending the money, and how it's accounted for, it could create some problems down the road.