During a divorce, the division of property is usually the most heavily-disputed issue. Without a prenuptial or post-marital agreement, most things acquired during the marriage are subject to equitable division, including businesses. While the actual business is retained by the owner, the non-owning spouse is awarded her share of the value of the business. In this situation, the spouse who owns the business is often caught trying to hide business assets during divorce.
What Are the Consequences of Hiding Assets?
Divorcing spouses commonly attempt to hide assets from both the court and each other, so that they can keep that property. However, hiding assets is illegal, and constitutes willful nondisclosure, perjury, or contempt of court.
Due to the nature of owning a business, a business-owning spouse can think of crafty ways to hide assets and to dispute assets. Though illegal, the non-owning spouse may be greatly injured by these actions. Thus, the non-owning spouse should be aware of methods to divert profits to secret bank accounts and an intentional misrepresentation of the decrease of profits. Though secret accounting may be a way complex area, spouses can hire forensic accountants to investigate whether there is any mishandling of business funds.
Can We Hire Separate Valuators to Evaluate the Business?
Of course, both spouses can hire their own independent valuator to determine the value of the business. Otherwise, there will not be a checks-and-balance system for the business-owner spouse to correctly valuate the business. The business-owner spouse can too easily undervalue the business, increase his expenditures and create fraudulent accounting books.
What If the Business Owner Intentionally Lowers the Value of the Business?
Intentionally lowering the value of a business is illegal and can result in significant penalties. But the non-owning spouse may have a right to discover such acts after the divorce has settled.
Some methods that the non-owning spouse should be aware of include:
- Business-owning spouses allowing customers, clients, and other debtors to defer payments until after an impending divorce.
- Business-owning spouse are pre-paying expenses and employee benefits, and making advance deposits.
- Business-owning spouses are purposely decrease prices, establishing a wider market share, and then hike prices after the divorce, thus raking in profits.
- Business-owning spouses are purposely overpaying taxes, and then request a refund after the divorce.
- Business-owing spouses are paying for gifts to a lover with business funds or using business funds for personal expenses.
Do I Need a Lawyer?
If you believe that your spouse is intentionally hiding business assets, then you should contact a family law lawyer. An experienced lawyer can help you straighten out business records and make sure that you receive the assets you are legally entitled to.