Some people learn during their divorce that the family company isn’t faring as well as they thought. While it is possible that things like economic downturns and dips in business might happen, it’s also possible that there is a case of sudden income deficit syndrome, which is also known as SIDS, present.
SIDS is problematic in divorce because it shifts the property division process. Splitting up assets and liabilities in divorces here is based on what is fair and equitable. Without an accurate accounting of what the business is valued at, it is impossible to structure a property division agreement that meets the necessary standards.
The method for making the company look less profitable than it truly is depends on the circumstances. Some business owners will funnel money from away from the company through fraudulent payroll or vendor accounts, so the payments appear they are going to someone else.
Another method that they might use is hiding cash payments coming into the company. This is accomplished by not providing a receipt for the transaction or using an unreported receipt book for these payments.
When a person claims a dip in the business income, their lifestyle should reflect it. When your ex hasn’t had a lifestyle shift but is claiming that the company is almost insolvent, looking into SIDS might be a good idea.
Because some of these situations are complex, adding a forensic accountant or an attorney familiar with small businesses and divorce to your team may be beneficial. They can use various methods to find out if there is anything being hidden in the business. This can help you ensure that you’re getting what you should in the property division order.