When a Business Owner Lowers Their Income During Divorce

 Posted on February 29, 2020 in Divorce and Finances

A spouse who owns a business is capable of manipulating their income during a divorce. Reporting a lower income means that they may not have to pay as much towards child support or spousal maintenance. A business owner may intentionally lower their income leading up to the divorce through methods such as:

• Deferred compensation
• Putting more of their revenue towards business expenses
• Delaying customer payments until after the divorce

If you believe your spouse’s reported income is unusually low, you need to investigate their business and income records to see where their money is going. It is important to act on your suspicions during your divorce.

Recent Case

In the Illinois case of In re Marriage of Onishi-Chong, a woman was petitioning to revise her divorce settlement because she claimed her former husband fraudulently concealed his income. The husband is the co-owner of a financial advising company. During the divorce, the petitioner claimed that her husband’s income should be higher than what he reported, based on the following observations:

• The husband and his business partner each owned 50 percent of the company.
• Up until 2011, they both received equal compensation from the company.
• In 2012, the same year as the divorce, the husband’s compensation became lower than the compensation earned by his business partner and other employees at the company.

The husband responded that the income discrepancy was because his business partner was originating more clients than him. In 2014, the spouses reached a settlement that included the husband paying maintenance.

Post-Divorce Petition

In 2016, the petitioner filed a motion to vacate the maintenance portion of the divorce settlement, claiming that her former husband conspired with his business partner to conceal his income. She alleged that her husband’s income significantly increased immediately following their divorce so that he was receiving more compensation than his business partner. She also claimed that he had lied that his business revenue was declining when subsequent records showed that it had grown. The petition was dismissed in a summary judgment in both the circuit and appellate courts. The appellate court explained that:

• She had presented evidence of potential fraud during the divorce but did not further pursue the claim.
• As part of the divorce settlement, she had waived her right to further discovery or claims of concealment of assets.

Contact a Kane County Divorce Attorney

The lesson to be learned from this case is that you need to immediately follow up on your suspicions of fraud before you sign any legally binding agreements. A St. Charles, Illinois, divorce lawyer at Goostree Law Group will work with a forensic accountant to determine whether your spouse may be hiding assets. Schedule a free consultation by calling 630-584-4800.

Source:

https://courts.illinois.gov/Opinions/AppellateCourt/2020/2ndDistrict/2180824.pdf