Divorcing an Entrepreneur? The Unusual Ways They May Hide Assets

Apr 26, 2014
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Divorce lawyer NewmarketMaybe you never really understood what they did on a daily basis to earn income. But you know they’re a business owner.

Now that you’re getting divorced, it’s time to educate yourself into how entrepreneurs have a more complex set of financial records. No matter what you suspect, before making accusations or attempts to get “proof,” consult with a qualified family attorney.

Even if you’d never believe in a million years they’d hide assets in a divorce, with articles and information being published to show them how, chances are you’ll never find those valuable hidden assets unless you look.

Most People Hide Money From Their Spouse

Forensic accountant Erin Pamer recently shared quotes from a Wall Street Journal piece on why social media and online websites have made it a lot harder to successfully hide money, even though many continue to try.

“31% of U.S. adults who combined assets with a spouse or partner say they have been deceptive about money, and 58% of these adults say they hid cash from their partner or spouse.”

Entrepreneurs And When They Earn Money

Only a small segment of the population is self-employed or business owners, but if you’ve married one, you know they view the world and money quite differently from salaried employees.

Entrepreneurs are passionate “rule-breakers” and risk-takers by nature, and the culture of startups these days supports a mindset of “ask for forgiveness, not permission”. Experienced entrepreneurs often have personal experience with extreme financial droughts (times of innovation and internal growth), and on the other hand dramatic growth that sometimes comes delivered in lottery-like paydays. As a result, it can almost seem logical or even moral, to temporarily reallocate their own income “for” other costs or the health of the business.

Note: “Rule-breakers” are people who refuse to accept the limitations of what we believe can be achieved; not people who feel they are above the law. Hiding assets in any legal proceeding, intentionally or accidentally, is illegal and carries serious consequences.

By contrast, people who work as salaried employees often have only one source of income, received in a set amount, on a set ongoing schedule making it significantly more difficult to hide any income or assets.

Basically, entrepreneurs will have more frequent opportunities to try to “hide” assets by manipulating the timing of business payments received or temporarily disqualifying themselves from receiving a salary or profit distributions during a time of “plowback” (cutting owner salaries and profit distribution, to pay other business expenses).

5 Places to Look For Hidden Assets in the Business

This article on Wife.org, a trusted resource for women to take control of their financial lives, comprehensively lists the most common but unexpected places you can uncover hidden assets including 5 ways we identified that an entrepreneur might try to hide assets:

  1. Collusion with his partner to delay payment of bonuses, stock options or raises until after the divorce.
  2. Salary paid to a nonexistent employee from your husband’s business. The checks will be voided after divorce.
  3. Delay in signing long-term business contracts until after the divorce.
  4. Antiques, artwork or hobby equipment that is overlooked and undervalued. Look for lush furnishings in his office.
  5. Money paid from the business to someone close, such as father or girlfriend, for business services not rendered. The money will no doubt be given back to your spouse after the divorce is final.

If Your Entrepreneur Ex is A Leader, Book Author, or Public Speaker

Don’t forget that if your ex is becoming a brand name themselves, if they are travelling around the globe to consult or speak, or they’ve developed their own information product published as a book, you may find additional places for you & your lawyer to look.

  • Air miles or other “lifestyle” travel miles accounts can accumulate a huge cache of redeemable worldwide travel, food, life experiences and household appliances
  • Book sales and royalties can be adjusted and manipulated by delaying the timing of promotional campaigns and other activities

True to form, entrepreneurs rarely take the obvious path in life. While they’re probably not intentionally trying to hide assets, it’s still in your best interest to know for sure.

Our Newmarket divorce lawyers can help you uncover any hidden assets that your spouse may be hiding in the event of a separation. Contact us today with any concerns you may have.

About Brian Galbraith

Brian Galbraith is the owner and founder of Galbraith Family Law Professional Corporation. Brian is known in the legal community for his commitment to efficiently practicing family law using technology and streamlining the divorce processes.