My Business Partner Took Me off the Bank Account — What Should I Do?
Finding out that your business partner has removed you from the business bank account, or changed credentials so you can no longer access financial information, is an alarming development. It signals a serious breakdown in the business relationship and, in many cases, raises questions about whether something improper is happening with business funds.
What Removing Account Access May Signal
A partner who removes another partner’s bank account access without authorization or notice may be positioning themselves to control business finances unilaterally. This can precede something in the law referred to as self-dealing (for example, unauthorized compensation, diversion of business revenue, or payments to related parties the other partner has not approved. Whatever the motivation, the action typically warrants prompt attention.
Review Your Governing Documents
The starting point in most situations is the governing document, the LLC operating agreement, partnership agreement, or shareholder agreement. These documents typically address who has authority over business finances and what rights members or partners have to inspect books and records.
New Jersey and New York both have default statutory provisions giving members and partners the right to inspect financial records of the business. Those rights exist regardless of whether the operating agreement addresses them specifically.
Steps Commonly Considered
Business owners who face this situation and the business dispute lawyers who advise them typically evaluate whether the removal of access constituted a breach of the operating agreement, whether it reflects a breach of fiduciary duty, and what emergency or interim relief might be available if business funds appear to be at risk.
In some situations, counsel sends a formal demand for restoration of access and production of financial records before taking court action. In others, particularly where there is evidence of ongoing financial misconduct, practitioners consider whether asking a court to grant emergency injunctive relief is appropriate to preserve business assets while the underlying dispute is resolved.
Document What You Know
Business owners in this situation are generally advised to document what they know, when bank account access was removed, what communications have been exchanged with the partner, what financial records they have already obtained, and what transactions they are aware of. That documentation becomes important if the dispute moves toward litigation or arbitration.
The specific remedies available depend heavily on the governing documents, the business entity type, the jurisdiction, and the underlying facts. Business owners facing this situation should consult with a business partnership dispute attorney promptly to understand what options may be available under their specific circumstances.
Disclaimer
The legal and business issues discussed in this post vary depending on the specific facts and circumstances of each situation. The legal and business issues discussed in this post vary depending on the specific facts and circumstances of each situation. This corporate lawyer blog post is for informational purposes only and does not constitute legal advice. It is not an offer for Russo Law LLC to represent any party, nor does it create an attorney-client relationship. No action or inaction should be taken based on the information provided without seeking professional legal counsel. This post is intended for businesses in New York and New Jersey. It may not reflect laws in other jurisdictions.
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