Keep An Eye on Business Income During Divorce

Building a business is a difficult journey. When you and your spouse make this journey together, you can both reap the benefits of the hard work. But, what happens if you end up divorcing? The answer to this isn't always easy. For spouses who are in this position, there is one huge factor that you have to watch out for.

There is a chance that your soon-to-be ex will try to skew the income figures for the business in order to walk away with a larger share of the divorce settlement. This is sometimes called sudden income deficit syndrome.

Decrease related to the divorce

Sudden income deficit syndrome doesn't occur because of fluctuations with the business. Instead, it is purposeful deceit by one spouse. In many cases, the decrease in income starts when the divorce is filed. However, some spouses will begin to diminish the income figure even before the divorce papers are filed.

When spouses start long before the divorce is filed, it is usually because they have already decided that the marriage is over. They attempt to slowly cut back on the income that their wives or husbands know is streaming in so that they won't have to explain a sudden drop that occurred in conjunction with the divorce.

Finding the discrepancies

The chance of sudden income deficit syndrome occurring is one of the reasons why divorcing with a business is so difficult. You need to be aware that even if you don't think that your spouse would do this, that there is a chance it still may occur. Remember that protecting yourself is your top priority right now.

In order to do this, you will likely need to have a forensic accountant investigate the situation. These individuals are trained in finding key points about discrepancies in business income. They use a variety of methods, including checking public records, bank statements, receipts and tax records to discern what is truly going on with the finances.

Handling the division

You have a lot to think about when you are trying to determine how assets and liabilities will be divided in the divorce. When it comes to the business, there are a few different ways to handle it. You might buy your ex out of the business, your ex could purchase your share, you might sell the business and halve the profits or you may continue to run the business together. No matter what option you and your soon-to-be ex-spouse choose, make sure that you have the knowledge to protect yourself.