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Did the family business’ income drop suddenly during your divorce?

| Mar 20, 2021 | Divorce |

Many situations can occur when a couple decides to end a marriage. For those who have a family business, trying to determine what will happen to that business is necessary. In some cases, the business becomes a major area of concern because it seems as though the income for the company suddenly dips when the divorce is filed. 

Sometimes, the drop in income is a ruse. This is known as sudden income deficit syndrome. It usually affects businesses in which one spouse has a working knowledge of the company’s finances and the other spouse doesn’t. 

Why does sudden income deficit syndrome occur?

The spouse who has knowledge about the company’s finances may want to do what they can to protect their own finances. They see the business as a way to do this. Instead of reporting all the income of the business, they hide some. This can be done by altering the books, paying out money for fraudulent payroll or vendor accounts, and a host of other methods.

How can you find out if this is happening?

Working with a forensic accountant can help you to find out what’s going on with the company’s finances. They can delve into the records to see if there’s anything amiss. They can also look at public information and other sources to determine whether everything matches up or not. 

The issue with hiding income in the business is that it affects the outcome of your divorce settlement. If you have reason to believe that this is going on, discuss the matter with your attorney. You have to do what you can to protect yourself as you end your marriage.