If you have clients married to business owners, here’s some crucial information they should know, especially if they’re named in the articles of incorporation or partnership agreement:

  • Places their names appear; documents they’ve co-signed
  • Business type (partnership, corporation, etc.)
  • Typical revenues, expenses, debts, cash flow
  • Nature of buy-sell and shareholder agreements
  • Each spouse’s type and number of shares; voting rights
  • Dividend rights; where dividends are deposited
  • Nature of spouse’s compensation
  • Number of employees; other shareholders
  • Exit strategy

Knowing how a business operates in harmonious times will allow clients to detect attempts to artificially lower its value. These include performing cash transactions; creating holding companies; adding unnecessary employees or new shareholders (e.g. a boyfriend or girlfriend); recording unusual losses; deferring compensation; and overpaying income taxes.

Cash transactions are nearly impossible to trace. But if a business-owner spouse can make a large down payment for a car or house, that could indicate a higher valuation than the books reveal, says Angela Galer-Grist, an investment advisor with BMO Nesbitt Burns in Toronto.

“If your lifestyle doesn’t match the income you’re showing,” she says, “you can build a case demonstrating assets are being hidden.” This is easier if the family records its cash flows.

“Pay attention,” warns Wendy Olson-Brodeur, founder and owner of The Financial Divorce Specialist Inc. in Calgary. “When your husband’s mail arrives, look at the envelopes. Is there anything unusual? Ask why.”

Linda Cartier, president of the Academy of Financial Divorce Specialists in Sudbury, Ont., recommends shareholder spouses sit in on meetings at least once a year. She also recommends seeking independent advice before signing anything.

“I had a client who signed away all her rights” to her husband’s company several months before he left her, Cartier says. “She was used to him bringing in paperwork and saying, ‘Sign. Don’t worry about it.’ After the fact, it’s a he-said, she-said problem. Being passive when you’re not [truly] a passive shareholder is very dangerous.”