Some couples own a company together, but only one of them plays a role in the business. When a stay-at-home spouse doesn’t know what’s going on with the business, they might face some challenges during the divorce process. One of the points that must be decided during the divorce is that the property must be divided. This includes the business.
While it might seem as though this should be a simple process, there are some circumstances that can complicate it. Sometimes, the person who runs the company will try to make it seem as though it isn’t as profitable as it really is. This is known as sudden income deficit syndrome, and the timing usually coincides with the decision to end the marriage.
Making the business seem less profitable means the spouse who runs the company may be able to walk away with a bigger share of the property. Not only are they funneling money in the eyes of the legal system, they are also reducing the value of the company, so the other spouse will get less than they should in the divorce.
There are many ways that these individuals might hide the profits. Not recording cash transactions, paying fraudulent vendor or payroll accounts that direct money to an account they control and altering the financial documents for the company are a few ways that this might occur.
Individuals who are dealing with divorce that involves a family business may need to add a forensic accountant to their team. This can help them to discover if there is anything amiss with the business finances, so they can get a balanced property division settlement.