Richard C. Bardi & Associates LLC

Some people try to hide business income during a divorce

Owning a successful business is a great way to support your family. In most cases, the business is beneficial to your marriage. This might change if the marriage is in trouble and heading toward divorce. If your soon-to-be ex handles the finances for the company, you need to pay close attention to what is going on.

Sometimes, the issue that comes up is that one spouse tries to hide income or business assets from the other. This is known as sudden income deficit syndrome, or SIDS. Unfortunately, it might not be easy to spot if you aren't involved in the daily running of the business.

There are many ways that your ex might make this happen. Collecting cash payments and writing receipts on an unclaimed receipt book is one. Creating false invoices indicating payments to nonexistent companies is another. Even creating fraudulent payroll accounts might occur.

Taking a close look at the books for the business might clue you in to the possibility of SIDS. If you notice a dramatic drop in income just before or after the divorce filing, you may need to retain a forensic accountant review the finances.

In some cases, the spouse who manges the company might plan a divorce long before filing the petition. In these cases, they might have had time to slowly drop the income for the business so that it doesn't appear to be abnormal by the time the divorce is filed.

Looking at the lifestyle the other person is living might be something that highlights a problem. If your ex is claiming a drop in income but is making high-value purchases and/or living a lavish lifestyle, you might need to explore the possibility of SIDS. You deserve a fair settlement, so don't feel bad about checking deeper into situations that seem amiss.

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