Documents For a Business Lifestyle Analysis – Fraud Files Blog

Doing a lifestyle analysis on a business during a divorce  can be very important to find out the truth about the numbers. It involves going down to the detailed transaction level to look for clues about what has really happened with the money.

What documents do you need? When a closely held business is being evaluated in connection with a family law case, the following business-related documents may be requested:

• Business ownership records (stock certificates, charters, operating agreements, joint venture agreements, corporate minutes, or other related documents)
• Business income tax returns (Form 1065, 1120, or 1120-S) for any business in which the spouse/parent has had an ownership interest for the last 5 years
• Minutes books of companies controlled directly or indirectly by the party, including articles of incorporation, amendments, bylaws, minutes, and resolutions of shareholders and directors
• Financial statements for any business entity in which there is an interest, including professional practices, joint ventures, and co-ownerships for the last 5 years
• Copies of valuations or appraisals done within the preceding 5 years
• Copies of budgets, forecasts, projections, or business plans prepared within the preceding 5 years
• List of all bank accounts in the company’s name, including the bank name, bank location, account number, and type of account
• List of all bank accounts in the company’s name that have been closed within the last 5 years, including the bank name, bank location, account number, and type of account
• Copies of all applications for credit made with banks, mortgage brokers, or any other financial institution in the preceding 3 years
• Copies of all bank statements, checks, deposit slips, and wire transfers for the last 3 years
• Copies of all credit card statements for the last 3 years
• Copies of all brokerage account statements for the last 3 years
• Copies of all applications for credit with any financial institution during the preceding 3 years
• Access to detailed accounting records, including the general ledger, general journal, sales journal purchases journal, cash receipts journal, cash disbursements journal, and subsidiary ledgers
• List of names, addresses, and ownership percentages of all shareholders

This list is not all-inclusive. It is the starting point, and contains some of the most common documents that will be requested for a business. However, other items can be obtained depending on the issues in a particular family law case.

As always, the most reliable records are third party documents, such as bank statements and credit card statements. These are nearly impossible to manipulate, and if obtained directly from the third party, the data is reliable. These statements will tell the truth about where the money moved to and from.

Bank statements and credit card statements might show a different picture than the one that has been reported by the spouse in financial disclosures, income tax returns, or financial statements. Bank deposits may show a higher level of revenue than the business has been reported. Although people who are attempting to conceal revenue do not usually deposit all cash receipts to the bank, it is still important to analyze the deposits in the event that they contain some useful information.

The attorney should call on the financial expert for assistance with the discovery process. Not only can the expert provide insight into the documents that should be requested, he or she can also evaluate what is produced to determine if it is fully responsive to the demands that were made.