SELF-EMPLOYMENT & FAMILY BUSINESS

When one party is either self-employed, or has ownership interest in a business, two issues arise.  First, as it relates to support, there are many ways a divorcing spouse can hide income to minimize child support or alimony obligation.  One of the first things our attorneys do is attempt to show that their monthly expenses exceed what they claim their income is.  This can show a Judge that they are attempting to hide their true income. 

The second issue as it relates to business ownership is that a business is more than just a source of income – it is a complex asset that must be properly valued and accounted for in the final property settlement agreement.  Dividing the value of the business without damaging the business itself requires experience and skill. 

The best way to handle the valuing of a business is to file for divorce first, then have your lawyer subpoena your spouse’s business records.  There is a wealth of information contained within these financial documents and an experienced “business mind” will help you organize and assess it.

Quite often, issues such as under-reporting income and hidden assets creep into business ownership.  That’s why our attorneys make formal discovery and hidden asset searches a top priority.  The most common forms of deception we encounter include:

• Salary payments to a non-existent employee, with checks that will be voided after the divorce.
  
  
• Money paid from the business to someone else – such as a father, mother, girlfriend, boyfriend – for services that were never actually rendered (the money is eventually given back once the divorce is final).
  
  
• Delays in signing long-term business contracts until after the divorce.  Although this may seem like smart divorce planning, if the intent is to lower the value of the business it is considered hiding assets.
  
  
• Prepayment of expenses in order to lower the profitability of the business.
  
  
• Payment of personal expenses from the business – lowering the real value of the business and hiding income of the spouse.  Some expenses may be deemed reasonable (auto expenses and health insurance), but others could be extreme (unlimited travel and entertainment, payment of life insurance policies, etc.).

Finally, the forensic accountants and business valuation experts we employ often compare a target company’s performance to peer companies.  Most often, they’ll analyze and compare the six-digit SIC number disclosed on the tax return with other companies viewed as similar.

We firmly believe that the interests of all parties in a divorce are usually best served by taking a collaborative approach, but in those situations when best efforts fail, our lawyers take an aggressive stance in advocating on behalf of our clients. 

 Call (800) 910-DIVORCE or contact us for a no-obligation consultation on your contested matter.  Learn More