Owning a business with your spouse is a life goal for many people. This is a wonderful thing, but if the marriage falls apart, the business might become an albatross around your neck. You need to think carefully about some specific points if you do realize that your marriage is heading toward divorce.
For some women who are married to a business owner, the insider knowledge of the business and finances might lay only with the husband. This could work during the marriage, but it can spell disaster if a divorce is imminent. Here are some points you need to know about a phenomenon known as sudden income deficit syndrome:
What is sudden income deficit syndrome?
Sudden income deficit syndrome occurs when a business owner slowly funnels money out of the business’ income and claims that profits have gone down. This is usually done to hide money from the divorce proceedings. One thing to know about sudden income deficit syndrome is that it might not be all that sudden. If a person is planning a divorce, the decrease in income might be executed slowly so that nothing seems amiss when the spouse hears the current income of the business during the divorce process.
How is this accomplished?
There are many ways that a business owner might try to hide income during the divorce. Paying non-existent employees or vendors might be a way. Another way is that cash payments might not be recorded. In some cases, the business owner will provide receipts from hidden receipt books to people who pay in cash so that the record of those payments isn’t included with the payments from other methods. Hidden bank accounts and unreported credit card processing accounts might round out the plan of the business owner to conceal the actual income during the divorce process.
How can it be detected?
A forensic accountant is a good addition to your divorce team if there is a business involved. These individuals can dig into the financial records of the business to determine what is going on. They can check public records and scrutinize records for information. Looking for signs like higher-end purchases that don’t mesh with the reported business income can also signal that there is a need to dig deeper into the finances of the business.
Even if your husband has always been your protector and provider, you need to take on these jobs yourself if you are in the midst of a divorce. You must protect your rights and your interests throughout the process.