When a couple owns a business together, there’s a chance that one spouse knows all about the finances of the company while the other doesn’t know as much. As a result, the one who isn’t that familiar with the finances of their company will need to pay close attention if they decide to divorce.
Some business owners who are going through a divorce or have a feeling a divorce is coming may try to make it appear as though a company isn’t as profitable as it really is. The informal name for this is sudden income deficit syndrome. This is done in an effort to shift the property division in their favor so they can walk away with a bigger share of marital assets.
How do they accomplish the sudden downward income?
They can employ several methods to make it appear as though the company isn’t making much. They may pay out fraudulent invoices to vendors, but the money is actually funneled into an account they control. They may not record cash payments as they had in the past. Ghost payroll recipients are another method.
How can the other spouse find out about SIDS?
Employing a forensic accountant is one of the most effective options to find out if SIDS is occurring. These professionals can check tax records and other statements to find out about the financial health of the company. It’s also possible to gather clues from other areas. For example, a lavish vacation or new vehicle purchase might be a red flag if they claim the company isn’t profitable.
Ultimately, small business owners going through a divorce must take steps to protect their interests. Working with someone familiar with these matters may, therefore, be beneficial.