Family businesses often have unique operating structures. When they’re operated by spouses, the arrangement may involve one party taking control of the finances of the company while the other handles day-to-day operations or creative work. If the marriage devolves, however, this could work against the spouse who isn’t deeply involved in the business’s financial matters.
Because the owners of a business are in a prime position to control the company’s finances, some opt to try to skim some money off the top and then claim that the business isn’t doing as well as it truly is. This is known as sudden income deficit syndrome, which is an illegal way to walk away with more money in the divorce.
The property division process that occurs during the divorce is based on complete disclosure by both parties. When one spouse hide revenue from a family-owned business, the other one doesn’t have the option of receiving what they’re due. This disadvantage can make a big difference, so it mustn’t be allowed to occur.
There are several ways that business owners can hide revenue. Creating fraudulent accounts, including those for vendors and payroll, can help them to move money to hidden places where they hope it won’t be found. Spotting it can be complicated because they might have been decreasing the reported revenue since they decided the divorce was imminent.
If your spouse has financial control of your family-owned business, it might be wise to add a forensic accountant to your divorce team. A forensic accountant can review the financial affairs of the business to determine if there is anything amiss. They may also look at public records and other kinds of records to see if they can uncover hidden assets. This can help you to receive a fair settlement in your divorce.
