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Beware of a dip in business income during divorce

On Behalf of | Jul 9, 2020 | Divorce

Owning a business takes a lot of work for the person who’s running it and trying to make it grow. They may have a spouse who is standing behind them keeping up with other areas of the family while they work on the company. If the marriage begins to crumble, it is possible that the person who was running the business might worry about how they are going to fare in the divorce.

This fear can lead them to try to take steps to make it appear as though the company isn’t doing as well as they originally claimed. It is an event that has been dubbed sudden income deficit syndrome because of how often it happens.

There are many things that the person who is familiar with the affairs of the business might do to make it appear as though the company isn’t as profitable as what they claimed it was. This can be done by changing the financial records for the business, which might involve making payments to payroll and vendor accounts that don’t really exist.

If you’re facing a divorce and haven’t been active in the financial aspects of the company, you can work with a forensic accountant to determine what’s going on in the business. This is especially important if the company was doing well and then revenue just dropped all of a sudden around the time of the divorce or when things got difficult in the marriage.

It is imperative that you get the settlement that’s based on the facts of the situation. Misstatements about the income of the business can prevent that from happening.