Understand how business income might impact divorce

Published By | Apr 10, 2020 | Divorce |

A stay-at-home spouse counts on their spouse to pay the bills and provide the income. This sometimes comes in the form of a family-run business, but it isn’t usually an issue as long as the marriage is a happy one.

There might be a problem if the spouse who runs the company decides that it’s time to divorce. Sometimes, business owners who opt to split from their spouse will try to make it appear as though the company isn’t as profitable as it really is. This is often puzzling to the stay-at-home spouse because they think everything is fine with the money.

Beware of misleading information

During the marriage, you might have taken your spouse at their word. Now that you know a divorce is in progress, you can’t really do that.

Instead, you may consider adding a forensic accountant to your team so that you might be able to unearth the misleading information and the truth behind it. This can help to ensure that you’re getting the settlement that you deserve when you divorce.

Methods of hiding income

There are many different ways that a business owner might try to hide income. Typically, this happens suddenly when they decide the marriage is over. It’s known as sudden income deficit syndrome, or SIDS for short. In order to make the profit of the business look lower than it is, they might not report cash transactions or they may create fraudulent payroll or vendor accounts so when the money is transferred from the business to that account, it actually routes it to a hidden account they control.

Hints that something is amiss

Forensic accountants look at a host of factors to determine what’s really going on. Public records can be a good source of information. Sometimes, the clues are in the lifestyle the owner keeps living. Things like social media posts and similar points may provide insight into the business’ profits. If the company is truly doing poorly, your ex would have to cut back on some of the luxuries they’ve become accustomed to.

It’s imperative that you have an accurate accounting of the income of the business. This can affect the value that’s placed on it during the property division aspect of the divorce. Because this can have a direct impact on the case, you should do what you can to ensure that your ex is complying with the law and disclosing everything about income, assets and debts.