I misappropriated/commingled a small amount of business funds for personal use, can I go to jail? ?
admin | Apr 01, 2010 | Comments 2
I started a company in Oct. 2005, and invested $80+ of my own money positive over 2 years of work. In Jan. 08 I had an investor buy in for $25k for 25% ownership positive he was required to lend the company up to $175k as needed. He cut us off after $63k in loans and the company went under. He’s coming after me now, but I have no personal guarantee. I did take/commingle some funds for personal use when I got desperate but only for food, car payments, and car insurance so I can keep traveling for work. I also made some cash withdrawals from the biz bank account to pay for some business bills, some can be documented, some cannot. I wouldn’t mind paying back anything that I didn’t document, I reckon there is a total of about $4k in “bleak area” transactions. I just want this guy out of my life without anymore distress. I know I was stupid, but can he sue me or possibly place me in jail because of this? If so, can I avoid all problems if I promise to pay him back for any transactions that are iffy? Would he be responsible for anything because he didn’t meet his investment we agreed on? I’m in the administer of filing personal bankruptcy, ch. 7, if that makes a difference. Please aid! Thank you!
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Filed Under: Bankruptcy
a lot depends on the business structure. If you formed a partnership, then they money belonged to both of you and the remedy is simply to dissolve the partnership. If the business was incorporated and you used corporate money for personal expenses, including food, car payments and insurance, you have embezzled from the corporation and could be charged criminally if the DA is so inclined. The choice to seek criminal charges, but, is reserved solely to the DA. Paying back the company does not prevent the charges. Bankruptcy has no impact on the criminal charges. On the other hand, a civil aver cannot upshot in jail. If he sues, he sues for money and their is no debtors prison. If the company is incorporated, then an individual shareholder has a very limited authority to sue on behalf of the company. If it was a partnership, both of you were emancipated to use all the funds for anything you sought after.
Was the “bleak area” recent? Give yourself a K-1 with the distribution on it.
The problem may be he will hire a lawyer to aver that the corporation was really a nominee for you, and that therefore he can sue you personally. The way around it is to show minutes of owners’ meetings (you), board of directors (you) and corporate resolutions. Make those documents collectively, and show that income and expenses are accounted for. Follow the rules.
Whether this person will be satisfied with $4,000, you can only question. If he is, it might be worth it.
As for distribution of current assets, let the bankruptcy judge choose that. Certainly do not hide assets from him or her. That you can go to jail for.
The rest, no, they can’t jail you for that as you describe it.