Common Mistakes Business Owners Make During Divorce
Divorce is always complicated, but owning a business makes it more so. The fact of owning a business can make the just and right division of marital property far less straightforward – and more open to interpretation. If you do own a business – whether together with your divorcing spouse or separately – there are some common mistakes that can get you into trouble during the divorce process that you should assiduously avoid.
Commingling Business and Personal Finances
One way to confuse the issue of your business finances – and thus its value – is to commingle business funds with personal funds. If the business is your separate property (that you brought into the marriage with you), this intermingling of financials can blur the legal line than keeps it separate. Further, divorce is always less messy when the financial records involved are clear and straightforward.
Funneling Expenses through the Business
There are a variety of legitimate business expenses that naturally go through your business. The following expenses (and many others) are IRS-approved business expenses (in some situations):
Your smartphone bills
Your fuel bills
A percentage of your mortgage
If you are running all of your expenses through your business, however, it can inflate your income artificially, and it is not only a tax issue but can also lead to you owing more in terms of child support or spousal maintenance.
Failing to Obtain a Business Valuation
If you are facing a divorce, you are going to need to fairly divide your marital property (or to fairly divide the value of that property), and this includes your business. Even small businesses can be financially complicated, and if your spouse has more to do with your shared business’s financials than you do, it can leave you vulnerable to financial shenanigans. The best way to ensure that you obtain a fair division of marital property is to obtain a solid business valuation from a reputable source.
Allowing Your Divorce to Interfere with Your Business
Dividing a business in half is rarely feasible, but there is no reason to allow your business to be destroyed in the divorce process. The divorce process can quickly become heated – or worse – which can make keeping your business up and running very difficult. If you believe your business is faltering as a result of the divorce process itself, an experienced divorce attorney will help you explore your legal options, which may include a temporary injunction that can help prevent further damage.