Strategy for the Spouse of a Business Owner in a Divorce -

     In a divorce where there is a business or professional practice, there are two competing strategies.  The idea behind the two strategies is simple: One spouse wants the business to look as big as IBM.  The other spouse wants the business to look like it is going under.  There are many ways each spouse can prove their point.  We will discuss this subject from the viewpoint of the non-owner spouse.

    The problem is that a business or practice owner can hide money a gazillion different ways (the word "gazillion" means a lot!). The business owner has almost complete control over the finances and how they are written up on the business books and IRS tax return. 

    The first place to start is by getting the last five years of the business tax return.  This can be done through a legal mechanism called a "request for production."  The courts ultimately will force a spouse to turn these documents over to the other spouse. 

    One technique I like to use - that has the most potential for success. I like to graph all major expenses - as they are listed on the tax return.  If you do this, you will see some amazing things.  For example, for a business that uses vehicles, maintenance expenses may be steady for 4 years and then double in the last year.  Or payroll, going up one year in a very suspicious way.  The fact is:  business expenses should be fairly steady from year to year. They don't tend to double or triple in one year. That is a technique some business owners use to hide or purposefully reduce profits.

    Look on the tax returns for:

• "Dummied Up" expenses
• Phantom employees that don't exist
• Business property leased from an "Uncle Joe" or other such person
• An unusual imbalance between earnings and assets.  For example, it is very unlikely that a business which owns $300,000 in assets is only earning $10,000 a year.

    If you have the money, there are professionals called Forensic Accountants.  These people are trained as accountants but have chosen to specialize in uncovering financial fraud.  A Forensic Accountant looks through the books, looks at the physical premises, and looks at the lifestyle of the owner.  The Forensic Accountant then looks at the flow of money and tracks money that disappears during business operations.  All observations are weighed against each other and a judgment is made whether the owner is hiding money.  The advantage of a Forensic Accountant is their ability to testify in court.

   The Bottom Line: 

    Don't give up.  Hire the best professional help you possibly can.  Nowhere is there more potential for a spouse to recover money in a divorce.  Unfortunately, many spouses go without rightful property division, child support, or alimony because the business owner-spouse has hidden assets.  Be persistent, stubborn, and hard working in your efforts to uncover assets.  Your effort will pay for itself.

The Divorce Center can provide an experienced divorce attorney for your entire case or any individual part. Tampa, Pinellas, Pasco, Hernando County Divorce Attorney Howard Iken will give you personal attention, fast answers, and the loyal aggressive representation you need. We also offer a forms preparation service with lawyer review and consultation for reasonable prices. Check out our easysavr legal service. CONTACT US NOW or call 888-469-3486

    

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