How Unreported Cash From Your Spouse’s Business can Affect Your Divorce


As if going through a divorce were not stressful enough, if your spouse has a business which receives significant cash revenues, you must now be concerned about unreported cash your spouse may have removed from the business. If your spouse is less than cooperative in revealing the true financial state of the business, it can be difficult to determine exactly what the business is worth. In cases where one partner really has no part in the other’s business, that partner may have little idea of the assets and liabilities associated with the business. The other partner may bank on that fact, and use it to his or her advantage to receive more than a fair share of the business.

Below are some tips, which can help clarify how unreported cash from your spouse's business can affect your divorce and ensure you receive an equitable share of your spouse’s business:

It is essential that you speak with your Boulder divorce attorney regarding a business valuation expert with forensic accounting experience. While the cost of such a professional may be high, it is important you are realistic regarding the cost of the valuation versus your anticipated benefit. If you truly have no idea of the extent of the underreported cash from the business, this can be a difficult determination and could benefit from your attorney’s experience in such matters.
If you were involved with your spouse’s business then you likely have a good idea of the financial operations and procedures associated with the business. Even if you weren’t involved, you are aware of your standard of living during the marriage, what you spent and how you socialized. For instance, if your spouse is claiming the business makes about $60,000 per year, but you know your married lifestyle would have required much more money than that to maintain, it is definitely in your best interests to hire a professional to place a realistic value on the business. 
A business valuation expert will visit the actual site of your spouse’s business and will likely conduct an interview with management. He or she will be able to get a good feel for the operations of the business through such a visit, and will know who the key individuals in the company are, and whether important internal controls are present. The business valuation expert may even attend your deposition in order to ask key questions regarding the finances of the business.

Obviously, the type of business will dictate which financial issues must be considered. For instance, if the business is a construction firm, how often is your spouse paid in cash? Probably not so often, although it could be possible. If the business is a coin-operated laundromat, however, then the bulk of the income is cash. In such a business, the only way to get a good idea of the income of the laundromat might be to divide the monthly water usage by the gallons of water used per load, then multiply that number by the price per load. Another business which typically receives a fair amount of cash is a restaurant. Your business valuation expert will have methods which will give a fairly accurate estimate of sales, then can compare that estimate to what your spouse is claiming.

Digging through all business documentation can be an extensive process which requires hours and hours of work. Purchase orders may need to be sorted and compared with deposits, appointment books compared with deposit slips, or contracts compared to monies received. Because of the exhaustive nature of properly evaluating a business, you will want to be sure the benefits you could receive outweigh the cost of the valuation.

If you are considering a divorce in Boulder, you need an experienced Boulder divorce attorney on your side from the very start. Contact the Boulder divorce attorneys at Goff & Goff, LLC today for a free initial consultation.