Some of the types of businesses which are illegal involve the sale of drugs, bookmaking, gambling, pornography and prostitution. These are just examples of illegal businesses which can be quite profitable.
Valuation of Illegal Business
It is extremely difficult to value an illegal business. Individuals in illegal businesses do not maintain books and records proving their profitability or losses. They do not pay taxes on their illegal gain. They hide every aspect of these businesses. There is very rarely any reliable market comparable or financial data to compare these businesses to. If these businesses are made public they can be federal income tax liability and significant criminal penalties to the party involved with these businesses.
There are things that can be looked for to try to establish valuations of illegal businesses. The first issue is whether funds are deposited in financial institutions. Are credit cards used? Are all transactions made in cash?
Lifestyle Analysis
One of the best ways to reach a valuation of the amount of income created by the illegal business is to do a lifestyle analysis. This would show what individuals who are employed and pay taxes on would have to earn to live the lifestyle the individuals are living from the proceeds from an illegal business.
Keeping It Confidential
If a detailed analysis is made, a confidential meeting can be had with opposing counsel. In this meeting a proposed presentation that might be made to a court could be discussed. This will usually raise questions of caution by the attorney for the individual involved in the illegal business. Issues such as income tax liability, violation of criminal laws and jail time can be avoided by a settlement out of court without the acknowledgment of the existence of the illegal business.
Elliot S. Schlissel is a divorce lawyer who has been helping clients in all aspects of matrimonial and family law from more than 40 years. Elliot and his team of Family Law Attorneys help their clients throughout the metropolitan New York area
