FAMILY LAW... & MORE

How can your records help you keep your business?

| Nov 20, 2020 | Property Division |

You have worked hard to build up a profitable business, so if you are preparing for a divorce, you may worry that a court will award your spouse a portion of your business value. This ruling may cause you to sell off the business to pay your spouse. This is where your business records may make an important difference.

The records you keep of your business transactions can do a lot to clarify how much of your business value your spouse owns, if any. Forbes provides some examples to give you an idea of what business records you should have on hand to defend your business in a divorce proceeding.

Personal and business expense records

Personal money that you commingle with marital property or funds will almost certainly become marital property as well. Your company records should show that you have not used any marital money in your business. Demonstrating that your personal and business assets are not intertwined may help diminish a claim that you used personal money to pay for business expenses.

Pay records

If you have hired your spouse to do work for your business, your pay records should show that you have paid your spouse a fair wage. Otherwise, a judge may decide that your spouse deserves a larger payout from your business. Your records should also establish that you have paid yourself a fair market rate. If you underpay yourself, a judge might impute the market going rate to you as income for purposes of spousal support.

Cash records

Some business owners make transactions in cash since it is less complicated and does not require bank transfers. Still, it is crucial to document your business cash transactions. Money transfers without a paper trail could open you up to accusations that you have been trying to hide money from your spouse.

Ownership records

You should have records that clearly establish your ownership of the business. If you are the sole owner or if you have co-owners or partners, your documents should reflect that. It may also be beneficial to have some kind of succession or buyout provision in your documents that govern when and how ownership will transfer from one partner or investor to another.