For Pennsylvania’s small business owners, divorce often brings unwanted uncertainty, especially when your divorce involves child support. You already face pressure from online competition and changing markets, and you may not want to think about adding child support payments to the mix.
The truth, however, is that it’s particularly important for business owners to think carefully about child support. In most cases, Pennsylvania awards child support according to a strict formula. The formula uses the parents’ joint income to decide how much each should put toward the child’s upbringing. But when you’re a business owner or entrepreneur, simply listing your income can prove a trick.
The problem with listing an income
Small business owners don’t always take paychecks, and even if you do, your paychecks might not accurately reflect your real income. The courts often get a better picture of your income by taking your businesses’ total income and subtracting all reasonable expenses.
Even this picture can be flawed. It only offers a snapshot of a limited timespan, and you know your profits can change from month to month and year to year. It also offers a poor picture of the true value of a startup, which may lose money during its infancy but that has huge earning potential.
A frequent source of conflict
Business owners commonly find their income and assets are sources of real contention in the divorce. You may arrive at a fair estimation of your real income, but your ex may argue the number should be higher. Your ex may hire a forensic accountant to offer an expert opinion, and you may want to do the same.
Many lawyers will argue that it’s in the best interest of both sides to arrive at a mutually satisfactory number than to involve the court. The reality is that money is the leading cause of marital stress. It is unlikely to cause less stress or strife during your divorce, but you might ease the tension by giving your ex a clear and transparent picture of your finances and income.
Modifying your child support order
If your business slows and you find yourself struggling to make ends meet, you can petition the court to modify your child support. The court will look for a material change in circumstance and may reduce your child support if you can show you’ve suffered a real loss of income and don’t have the same earning potential as you did earlier.
You might want to discuss the matter with your ex before you file. Your ex could contest your income during a request for modification in much the same way as during the divorce.
Seek experienced counsel
The financial aspects of divorce are often far more complicated for business owners than for salaried workers. You want to be fully prepared to defend your interests. An experienced lawyer can help.