Legal Question in Business Law in Virginia

Shareholder's use of coportate funds for personal use

I am 50/50 owner in a LLC-Corporation with one other person. I recently discovered the other shareholder has written checks from one of our corporate accts to create a NEW LLC/Corp for the same type of business with an extremely similar name. S/he has incorporated this new company/LLC and is the sole stockholder. S/he paid for licensing of this new LLC with our current company's funds. The checks were written directly to two the state for the LLC and the special licensing needed to operate that business without my consent or knowledge. I also have found s/he is operating this business at another location and has paid for other bills for this NEW company directly from our company's funds. Is this embezelment? What recourse do I have. Am I entitled to 50% of the new company because s/he used assets from our company. This money taken was not a distribution and it wasn't salary. S/he believes the funds are his/hers to do as s/he pleases because it came from revenue s/he generated. I don't believe it is his/hers to do as s/he pleases. Can s/he use our corporate funds for his/her personal gain? No operating agreement exists.


Asked on 4/02/05, 10:03 am

1 Answer from Attorneys
Daniel Press Chung & Press, P.C.

Re: Shareholder's use of coportate funds for personal use

Under the facts you state, what the other member ("shareholder") did is improper, could be embezzlement, and could entitle you to either damages or to an interest in the other company. The lack of an operating agreement may complicate matters, as you would need to establish your interest in the first company. You should see a lawyer on this issue immdiately to go over the specific facts and documents and advise you on the best course of action.

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Answered on 4/02/05, 11:05 am


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