Running a family business takes a lot of work. When you and your spouse work together on the task, you both are probably attached to the company. This is a good thing as long as the marriage is solid, but it can cause a lot of problems if divorce becomes a factor. If you are heading toward divorce and have a family business, you need to be aware of what’s going on with the company.
There is a hidden danger in some family businesses when it comes to divorce. If one spouse handles the finances, the other one might not be aware of a phenomenon known as Sudden Income Deficit Syndrome (SIDS) occurring. Unfortunately, SIDS can directly impact the settlement you receive for the divorce and the decisions you make regarding the business.
This situation is easy to spot in some cases because there is a sharp decline in reported income for the business in the period immediately prior to the divorce filing. It might not be so obvious if the spouse over the finances has been slowly changing some things at the business.
SIDS can occur in many ways. They might have a second receipt book for cash payments so they can route those to an undeclared bank account. They may make fraudulent vendor or employee payments that go into that bank account that they control. They may change the records so it looks like the business is doing poorly.
When you are going through a divorce with a family business, it might be beneficial to work with a forensic accountant who can review the financial status of the company and help to ensure that everything is on the up-and-up. Having the business valued might also help to provide you with information that enables you to make decisions during the divorce. Remember, you have to protect yourself now because your ex is trying to protect themselves.