Business Owner Spouse's Hiding Assets in a Divorce
The division of property is usually the chief issue in divorce. Most things acquired during the marriage are subject to equitable division, including businesses. The actual business is retained by the owner, while the non-owning spouse is awarded her share of the value of the business.
Divorcing spouses commonly attempt to hide assets from both the court and each other, so that they can keep that property. Hiding assets is illegal, and constitutes willful nondisclosure, perjury, or contempt of court.
Owning a business gives a spouse numerous ways to hide assets. Among the most common is to divert profits into a secret account, and then misrepresent the business as being slow. As business transactions can be very complicated, a forensic accountant will have to be hired by the non-owning spouse’s attorney to investigate.
Business owner spouses also hire corrupt valuation professionals who are “encouraged” to undervalue the business. Spouses may provide the valuator with fraudulent accounting records. Spouses may increase expenditures before the divorce, adding new equipment and office furniture. An independent valuator will have to be hired.
Business-owning spouses may allow customers, clients, and other debtors to defer payments until after an impending divorce. By the same token, they can pre-pay expenses and employee benefits, and make advance deposits. By appearing to be beneficent, the business owner can then build up goodwill.
Business-owning spouses can purposely decrease prices, establishing a wider market share, and then hike prices after the divorce, thus raking in profits. They may purposely overpay taxes, and then request a refund after the divorce. They may pay for gifts to a lover with business funds. All of these practices can result in significant penalties.
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Last Modified: 11-08-2011 04:29 PM PST