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Shady Partners: 5 Red Flags that a Business Partner May Be Engaging in Fraud

FraudMany entrepreneurs consider partnership to acquire capital, share responsibilities, and gain freedom. A prospective partner may have earned trust and built a relationship over time. Working with a business partner is often a rewarding experience. It is an entrepreneur’s worst nightmare to discover that a partner has engaged in fraud. Fraudulent activities by a partner could put the other participants in a business at risk, so it is best to be aware of some common signs of fraud.

Fraud (Slow or Vague Reports)

Business partnerships often include a natural division of labor.[1] Different people have different strengths, and they focus on the tasks where their investment of time is most productive. Even so, partners should receive financial reports, at least quarterly, and have a grasp on how the business is doing financially. Inability to produce financial reports upon request could be a red flag, and consistent inability to provide this crucial information requires investigation.[2] If a partner cannot justify or detail income and expenses, consider seeking more information and assistance. Similarly…

Cagey Behavior

A partner who refuses to respond, changes the subject, or evades, instead of giving direct responses, should raise a red flag. In partnership, there should always be clear, transparent, and open communication. Partners should feel comfortable asking any questions and receive honest, non-defensive answers. 

Undeserved Attacks

Unfortunately, when someone is committing a fraud, they often begin to feel cornered and in defense, they lash out. By counter-attacking, they seek to put the other party on defense to gain the upper hand in the conversation. This includes berating or even blaming their partners for problems in the business. Should a partner ask a question and the response turns into blame, it is not a good sign. 

No Long-Term Relationships

Frauds often have narcissistic personalities, where they feel entitled to take what is not theirs, or lack empathy for others. These traits cause them to behave in ways that are manipulative, and cause harm. Dishonest behavior burns bridges. These personality traits are not a recipe for lasting personal relationships. Before entering a partnership, consider investigating the personal relationships of the prospective partner along with their financial status. If it seems like their business and personal relationships are new or distant, be cautious.

A Gut Feeling

Intuition is powerful. It is important to listen to intuition because the subconscious mind is often aware first.  Suspicion that something fishy may be happening, is enough to consider contacting us. We will be able to answer questions and advise about how to proceed.

If you have questions and need help, give us a call today at 786.533.1100. We are ready to help you with any business questions you may have.


How do I spot fraud before its too late?

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