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Family businesses can impact divorce settlements

June 26, 2020 | Firm News

The property division process of a high-net-worth divorce in Boulder and all of Colorado is often one of the most complex things aspects. While this is difficult in a lot of cases, it gets even more so when there’s a family business. There are a few things that you have to consider if you’re in this position.

First, you need to know what’s going to happen with the company. One party may buy the other out or the business might be sold. In some cases, both parties might continue to play active roles in the business. Once you know how this will be handled, you can move on to other points.

Second, you’ll have to take a look at the finances. This is where things can get complicated because you need to find out the value of the business. There is a chance that the books may have been altered if your ex played more of a role in the finances of the business.

A phenomenon known as sudden income deficit syndrome is possible. This occurs when money is shifted around to make it look like the company isn’t as profitable as it really is. The dip in income usually comes right around the time the decision to divorce was made. Working with a forensic accountant on your divorce team might be beneficial here.

Third, you’ll have to work out how the business will play a role in the property division settlement. Regardless of how the business is handled, you’ll still have to divide everything else up that was acquired during the marriage. The goal of the division is to have an equitable settlement, so you must ensure that all financial records, including those for the business, are factual and complete.

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