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How could business finances cause issues in a divorce?

| Nov 9, 2020 | Firm News

Going into a divorce, you have to think about every single aspect of your life, which includes your business. You may be doing things in your business that will lead to financial issues during your divorce.

According to Forbes, some business moves, such as not properly paying yourself or allowing business and personal funds to comingle, can lead to serious impacts on your divorce settlement.

Comingling funds

Taking loans out on your business account and using the money for both business and personal reasons can create a serious issue when it comes to the court dividing this debt. Doing it the other way, taking a personal loan for business debt, creates the same situation. You should keep your business separate in every way. This will make it much easier to determine debts and assets that you will split in the divorce.

Awkward financials

If you are not handling your business income properly, the court could take a completely different view on things, leaving you in financial trouble. For example, if you are not taking a proper salary, the court may assign one to you, and it may be more than you actually earn. It is also possible for the court to think you are trying to hide something if your finances for your business are not clear.

Business debt

Another area where you could face issues is if you are using business profits to pay down business debt instead of paying yourself a proper salary. The court will often count the money you use to pay the debt as income for you. This could leave you in a bad position post-divorce because you do not have that money and you still have the debt to pay off.