Going through a divorce is a challenging undertaking even when you only have minimal assets. It’s much more complicated if you have a family business. There’s a chance that the family business may become the primary source of contention when the owners go through a divorce.
If you and your spouse own a business together and you haven’t been involved with the day-to-day operations or the finances of the business, there’s a chance that you may become the victim of “sudden income deficit syndrome.” By making the business look less profitable than it really is, your spouse could take a larger share and leave you with less than you should receive.
Understanding a little bit about this phenomenon may help you to protect yourself if you’re in this position.
What is sudden income deficit syndrome?
Sudden income deficit syndrome means that the business is suddenly less profitable, and that the dip in profits just happens to align with the divorce. There’s a chance that your spouse may have been planning for the divorce by reducing the income of the business.
They may not keep proper receipts for cash transactions. They may create fraudulent invoices to pay fake contractors, but the money actually goes into an account they can access. They may inflate expenses.
It’s not always easy to spot this phenomenon. If you’re a small business owner who’s facing a divorce and feel as though inaccurate information is being provided about the business, it’s crucial to have experienced legal guidance to help you work to protect your finances and your interests.
