Family businesses, divorces and SIDS: What to know

On Behalf of Law Offices of Jayson A. Soobitsky, P.A. | Jan 3, 2022 | Divorce |

Building a business as a couple can be a rewarding experience, but it’s one that might lead to challenges if the relationship ends. It’s necessary to take steps to protect your interests if you think your marriage is ending while you have a family business. 

One thing that can happen is that one spouse takes advantage of their knowledge of the company’s finances to get over on the other spouse who isn’t as knowledgeable about the financial matters. This is known as sudden income deficit disorder. 

What is SIDS in a divorce?

SIDS occurs when the knowledgeable spouse hides income from the other spouse for the purpose of walking away with a greater share of the property. This can be accomplished in a variety of ways, but the end result is that the company appears less profitable than it truly is. 

It’s often necessary to dig into the finances of the company to find this phenomenon. The knowledgeable spouse might create fraudulent vendor or payroll accounts to funnel money into. They may also choose to underreport cash transactions to hide the income. 

Anyone who’s facing a divorce that involves a family business should ensure they’re familiar with the financial matters related to the company. Even if you don’t think that your ex would hide income from the business, be sure to look into it. This is the only way that you can ensure that you’re getting the settlement you’re due during the divorce. It may behoove you to include a forensic accountant on your divorce team who can delve deeper into the finances of the company.

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