A Word of Caution About Family Businesses and Divorce

In a marriage, a couple will usually work toward some common goals. One goal that might come up is starting and growing a business in Colorado that can support the family. This is all good until the marriage starts to sour. If you ever find yourself heading toward divorce, you should be prepared to take a look at what is going on with the company.

While it doesn't happen in all cases, there are some in which one spouse might try to finagle the financial statements from the business so that it appears the company isn't doing well. This phenomenon is known as sudden income deficit syndrome, or SIDS.

Why would someone do this?

Once a person decides they are going to divorce, their focus becomes self-preservation. When a business is involved, they will sometimes think that they can make it look like the company isn't as financially successful as it really is. This enables them to keep more of the money and start their new single life off on a better financial footing, as long as they don't get caught.

How can it be spotted?

There are many ways that SIDS can occur. Sometimes, the person will create false payroll accounts that are being paid into a hidden account that they have control over. They might have multiple receipt books so they can hide certain cash payments. Another method is paying nonexistent vendors or contractors and keeping the money to themselves.

Because some of these methods are so underhanded, it can be difficult to spot. In many cases, a forensic accountant will help to find out what is going on. An audit of the books for the business can also unearth the inconsistencies that can lead to your knowing that SIDS is an issue.

What should you do if you think it is going on?

Because the business is a big part of the marital assets, you should ensure that you are getting what you are due from it. This means that you need to have an accurate valuation done so that you know where it stands. Once you have this, you can handle the property division process properly. If you do find out that your ex lied on the disclosures or any paperwork for the divorce, you might have legal options available to rectify the situation. The last thing you should do is stand back and accept the deceit that comes with SIDS.