Running a small business can be a stressful experience. It becomes even more taxing if you’re going through tough times in your personal life. Divorcing a spouse can directly impact the business, and the business may become a major source of contention in the divorce.
If you’re a small business owner who’s going through a divorce, think about these points as you work to determine how to handle the business.
#1: The business may not need to close
It’s often possible for businesses to remain open even if the owners divorce. One spouse may buy the other one out. Some opt to continue running the company together. It’s likely best to talk to the employees once you know what’s going to happen with the business.
If one spouse takes over the business or if you’ll run it together, you must have a solid agreement in place. Write out the terms of the agreement in full so both parties can review them in the future if there’s ever a question about what should happen.
#2: Business finances may be scrutinized
The finances of the company may come under scrutiny because of a phenomenon known as sudden income deficit syndrome. This occurs when only one spouse is familiar with the finances of the company. That person may try to cover funds that are coming in to make it seem like the company isn’t as profitable as it truly is.
Hiding the income can occur in a host of ways. Cash payments might not be recorded properly. Inflated expenses might be the chosen method of hiding income. This occurs when false invoices are paid into accounts that are controlled by the business owner. These may appear as payments to vendors or as payroll payments. Delving into the business’ finances may help to prevent these from occurring.
Property division in a divorce is often a contentious matter. Make sure you consider the options and how they will affect your future. Working with someone who understands your situation and who can help you protect your rights may make the entire process easier.
