Divorce is a difficult process, and it can become even more challenging when one spouse attempts to hide assets. In some cases, a spouse might even use their business to conceal money or property.
This tactic can create an unfair financial outcome in the divorce settlement. It is important to know the signs that your spouse might be hiding assets in their business.
Changes in business income
One sign to watch for is a sudden drop in the business’s income. If the company has been profitable but suddenly reports lower earnings, this could be a red flag. Your spouse might be diverting income to a separate account or delaying payments to make it appear that the business is struggling. This can reduce the amount of marital property subject to division.
Increased expenses
Another warning sign is an increase in business expenses. Your spouse might start claiming more deductions than usual, such as inflated travel or entertainment expenses. This tactic reduces the business’s taxable income, which can lower the value of the company during the divorce process. They might also overpay vendors or prepay for services to reduce the company’s cash on hand.
Unexplained transfers
Watch for the transfer of business assets to a friend or relative. Your spouse might sell or transfer business property at a low price to someone they trust, with the intention of getting it back after the divorce. This can include selling equipment, vehicles or even shares in the company.
Hiding assets through a business can affect the divorce in several ways. It can lead to an unfair division of property, leaving one spouse with less than they deserve. It can also reduce the amount of spousal support or child support awarded. Knowing how to recognize the signs of this malicious behavior can help ensure a fair separation.
