Business owners can often control the income range of the business. Aggressive marketing can pull in more money, while a pause in marketing could keep the revenue consistent. For most married couples who own a business, making sure that it is successful is a priority. But, this could change when one party decides that the marriage is over.
When a divorce impacts the family business, there are many factors to think about that can affect the legal settlement, as well as the company's structure. One thing that can quickly become an issue is the revenue of the business.
Why should you be concerned about the historical revenue of the company?
Sometimes, one spouse handles more of the money matters related to the company. This leaves the other person in the dark about what the business is making, which leaves room for misstatements about the revenue when a divorce happens. There is a chance that the company might experience sudden income deficit syndrome, or SIDS, in these cases.
What is SIDS?
SIDS in divorce cases has to do with a strategic dip in income for a business that coincides with the divorce. Despite the terminology "sudden" in the name, it can also happen slowly over time, but it will begin once a spouse determines that the marriage has ended.
To walk away with more money, the spouse who is controlling the company's finances might try to shift money around to make it look like the business isn't as profitable. They can do this in a host of ways, but hidden receipts for payments to the company and false receipts for money leaving the company are common. Some individuals might create fraudulent payroll accounts and funnel money into hidden bank accounts in that manner.
How can you combat SIDS?
One of the most effective ways to combat SIDS is to stay actively engaged with everything related to the company's financing. If you aren't very involved in the money matters, a forensic accountant may need to be a member of your divorce team. This individual can scrutinize the records to determine what's going on. They can call anything suspicious into question so that you can walk away with a fair divorce settlement that's based on the actual financial health of the marriage.
It is imperative that you learn about your rights during the legal process to end a marriage. The decisions you make now can either help or harm you as you embark on your new, single life.