If a business partner is taking company money, three things usually matter in this order: get the records, identify the duty that was breached, and find out where the money went. In a District of Columbia LLC, a member’s duty of loyalty requires them to “account to the company and to hold as trustee for it any property, profit, or benefit” derived from the company (D.C. Code § 29–804.09(b)). If funds have already been moved on to someone else, the Uniform Fraudulent Transfer Act supplies avoidance, attachment, an injunction — and appointment of a receiver (§ 28–3107).
What is the first practical step?
Get the books. A member’s information right is statutory, and exercising it early establishes what was taken and when — before anything is tidied up.
(a) In a member-managed limited liability company, the following rules shall apply: (1) On reasonable notice, a member may inspect and copy during regular business hours, at a reasonable location specified by the company, any record maintained by the company regarding the company’s activities and affairs, financial condition, and other circumstances, to the extent the information is material to the member’s rights and duties under the operating agreement or this chapter.…
D.C. Code § 29–804.10 — Right of members, managers, and dissociated members to information
What duty is the partner actually breaching?
The duty of loyalty. Note the wording — it is not merely a duty not to steal; it is an affirmative duty to account and to hold as trustee. That framing matters, because it shifts the argument from “prove theft” to “account for this”.
(b) The duty of loyalty of a member in a member-managed limited liability company shall include the duties to: (1) Account to the company and to hold as trustee for it any property, profit, or benefit derived by the member: (A) In the conduct or winding up of the company’s activities and affairs; (B) From a use by the member of the company’s property; or (C) From the appropriation of a limited liability company opportunity; (2) Refrain from dealing with the company in the conduct or winding up of the company’s activities and affairs as or on behalf of a person having an interest adverse to the company; and (3) Refrain from competing with the company in the conduct of the company’s activities and affairs before the dissolution of the company.
D.C. Code § 29–804.09(b) — Standards of conduct for members and managers
The same subsection also covers appropriation of a company opportunity and dealing with the company on behalf of an adverse interest — which is how diverted-funds cases often actually look: not a withdrawal, but business routed elsewhere. Related: breach of fiduciary duty.
What if the money has already been moved to someone else?
Then the transfer itself may be attackable. Two sections do the work — one covering present and future creditors, one limited to present creditors.
(a) A transfer made, or obligation incurred, by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.
D.C. Code § 28–3104(a) — Transfers fraudulent as to present and future creditors
(a) A transfer made, or obligation incurred, by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
D.C. Code § 28–3105(a) — Transfers fraudulent as to present creditors
The practical difference: § 28–3104(a)(1) reaches a transfer made with actual intent to hinder, delay, or defraud, while § 28–3104(a)(2) and § 28–3105 reach transfers made without reasonably equivalent value in the circumstances the statute describes — no proof of intent required.
What remedies are available?
(a) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in section 28-3108, may obtain: (1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim; (2) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure prescribed by sections 16-501 through 16-584; (3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure: (A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property; (B) Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or (C) Any other relief the circumstances may require.
D.C. Code § 28–3107(a) — Remedies of creditors
| Remedy | What it does | Section |
|---|---|---|
| Avoidance | Unwinds the transfer to the extent needed to satisfy the claim | § 28–3107(a)(1) |
| Attachment | Provisional remedy against the transferred asset or the transferee’s other property | § 28–3107(a)(2) |
| Injunction | Stops further disposition by the debtor or transferee | § 28–3107(a)(3)(A) |
| Receiver | Takes charge of the transferred asset or the transferee’s other property | § 28–3107(a)(3)(B) |
| Any other relief | As the circumstances may require | § 28–3107(a)(3)(C) |
| Execution | Levy on the transferred asset or its proceeds once judgment is obtained | § 28–3107(b) |
| Accounting / hold as trustee | Against the member directly, for property, profit or benefit derived | § 29–804.09(b)(1) |
Can a receiver be appointed over the money?
Yes — the statute names it expressly. § 28–3107(a)(3)(B) provides for “appointment of a receiver to take charge of the asset transferred or of other property of the transferee.” Where the company itself is the problem, a receiver or custodian may instead be appointed under D.C. Code § 29–312.22 in a judicial dissolution proceeding. See court-appointed receiverships.
Is there a deadline?
Yes, and it is claim-specific. Fraudulent-transfer claims are subject to the extinguishment provision at D.C. Code § 28–3109; fiduciary-duty claims run under the general limitation statute, D.C. Code § 12–301. Do not calculate your own deadline from this page — these periods turn on when the claim accrued or was discoverable, which is a fact question.
Frequently asked questions
Can I just remove my partner?
That depends on the operating agreement and the statute, not on the misconduct alone. Removal, dissociation and dissolution are separate routes with separate requirements — see business dissolution and ownership disputes.
Is this a criminal matter?
It can be both. The civil route recovers money; a criminal referral is a separate decision with separate consequences for the company. See fraud and embezzlement — civil recovery and internal investigations.
What if the company records are incomplete?
The information right in § 29–804.10 is the statutory lever, and an accounting claim under the duty of loyalty puts the burden on the member to account for what they derived — which is often more effective than trying to reconstruct the records yourself.
The money went to my partner’s spouse. Does that help them?
Not necessarily. The fraudulent-transfer sections reach the transfer itself, and § 28–3107 provides remedies against the transferee’s property, subject to the transferee protections in § 28–3108.
Who has to prove where the money went?
The partner who took it, in substance. D.C. Code § 29–804.09(b)(1) requires a member of a member-managed LLC to account to the company and to hold as trustee any property, profit or benefit derived from the company’s activities, its property or an appropriated opportunity.
Why does an accounting come before a damages claim?
Because the statutory duty is to account and to hold as trustee, not merely to compensate. That framing directs the work at establishing what has to be handed back, rather than at proving a loss figure from the outside.
Where are these claims heard?
In the Superior Court of the District of Columbia under D.C. Code § 11–921 — the same court that can appoint a receiver or custodian under § 29–312.22 where the person who took the money still controls the entity.
How does a member get access to the books when the other partner controls them?
By exercising the statutory inspection right rather than asking. In a member-managed LLC, D.C. Code § 29–804.10(a)(1) lets a member inspect and copy, on reasonable notice and during business hours, any company record material to that member’s rights and duties — and (a)(2) obliges the company to furnish material information without any demand at all.
Who pays for the forensic accounting?
The company funds it up front. Whether any of that is recoverable depends on the operating agreement or a statute, because the District has no general rule making the losing side pay the other’s costs.
Sources and legal authorities
- D.C. Code § 29–804.09 — Standards of conduct for members and managers
- D.C. Code § 29–804.10 — Right to information
- D.C. Code § 28–3104 — Transfers fraudulent as to present and future creditors
- D.C. Code § 28–3105 — Transfers fraudulent as to present creditors
- D.C. Code § 28–3107 — Remedies of creditors
- D.C. Code § 28–3108 — Defenses, liability, and protection of transferee
General information about D.C. law, not legal advice. Whether a particular transfer is avoidable, and what deadline applies, depends on facts this page cannot assess.
Related: Business Ownership Disputes · Breach of Fiduciary Duty · Fraud & Embezzlement (Civil Recovery) · Locked out of the business · Court-Appointed Receiverships · Business Litigation. Call (301) 901-3109 or use the contact page.