If you own a business and are going through a divorce, your Los Angeles divorce attorney will prepare you to answer questions from the opposing attorney for your spouse. These questions will be about the business’ acquisition and organization.
The Questions on Acquisition and Organization
While taking the other spouse’s deposition, attorneys will ask exhaustive questions regarding any family business either spouse is involved in. Below is a list of deposition questions the lawyer representing a spouse not involved in the family business will ask the spouse who owns the business.
The objective is to come up with an accurate assessment of the true income earned from the business, including all cash, compensation and perks that have produced and supported the family’s lifestyle. A spouse can conceal his or her pay in tricky ways, such as repayment by the business of shareholder loans, loans from the business to shareholders (viewed unfavorably by the banking community when discovered on corporate financial statements), distributions of retained earnings, and tax reimbursement arrangements in which the business pays a shareholder’s income taxes tied to profits that flow through the business to the shareholder’s personal returns. Such agreements usually require the shareholders who don’t need “reimbursement” to simply get a similar distribution of their choice.
- How were you able to acquire your interest in the business?
- If you bought or founded the business, what provided the initial funding?
- If you took out a loan, how did you repay it? What accounts were involved?
- If you acquired the business as a present or inheritance, was it in a single transaction or divided in multiple gifts?
- Did a transferor file gift or estate tax returns?
- Did you prepare appraisals at the time of transfer?
- Describe your business organization in terms of corporation, partnership and other factors.
- Can you characterize the nature of your interest? What is your percentage of ownership?
- What is your official title?
- Can you tell your Los Angeles divorce attorney the names, addresses, titles, and percentage interests of other owners?
- Do you know the names of accountants, lawyers and other professionals who performed services for the business?
- Who maintains the business’ books and records? Where and how is it done?
- What software (Quicken, etc) or other electronic media have you used?
- Who generates the reports, and how frequently is it done?
- Are they audited? Who audits them?
- Who is responsible for preparing the tax returns?
- Who maintains the bank records?
- Does the business have any outstanding loans from or to shareholders?
Spouses faced with the prospect of a difficult divorce will benefit from the legal expertise of a knowledgeable Los Angeles divorce attorney. To arrange your initial Strategy Session, please call Zonder Family Law at 818-309-7059.