Partner budgets: what is best practice for paying back the business when a partner goes over budget?
We are 3 partners and we have a budget or allowance we can spend within the business. There is one partner that constantly abuses the budget and we would like it to have consequences.
We tried to have him pay it back out of pocket but it's not working out, every year he insists he has no means to pay it back. We tried to remove it off his distributions but it also didn't work out, as we all must distribute equally.
You'll likely want to talk to an attorney on this since this seems like a legal issue more than an accounting one. Your operating agreement may have covered this, but very possibly will not. If it doesn't, then you'll need to consult with the attorney as to what your state laws allow.
The repayment for past expenses I imagine will be a stickier issue. Going forward, I would explore whether or not you can revoke his company credit card /restrict his access to the bank account - instead of having another partner handle the majority of the expenses and this partner requesting reimbursement on the rare occasion they spend money on a personal card... Again, this will vary based on your operating agreement/state.