Child Support for a Business Owner?
Ok..short background. BM does not use child support for SD12 expenses. Never has in the 8 years I've been involved with DH. Example: SD needed braces earlier this year. BM said she could not afford to pay her portion so she got her mom to. We paid for our portion. A few weeks later, BM bought herself an iPad. What? She couldn't pay for braces, but she can buy an iPad? That's just one example of many, but you get the point.
DH and I will possibly be buying a business at the first of the year. It will be a significant increase in pay for DH. The business will be in DH's name. How much of this business does BM have a right to take from DH in the form of child support? The standard in my state for CS taken out of a paycheck is 20%. Can she take 20% of DH's income from this business? That may seem like a stupid question, but if that's so, BM stands to get about $20,000 more per year in CS. That translates to alot of iPads! Will a judge award her that when she does nothing for this business? Heck, she doesn't seem to do any real parenting period that we can see. It just doesn't seem fair. But then life isn't fair, is it? It makes me sick.
Any business owners who can offer advice, words of encouragement, etc?
^^^ This! If the business is
^^^ This!
If the business is going to remain in his name however there are *some* ideas to help.
On paper your husband draws a SALARY. Period. I don't care if you make him earn $10/hr or $100k a year. There is a set amount on paper. In his salary package he can then be eligble for quarterly bonuses based on business performance/profits. CS will be set up based off his base salary, and they will likely find him liable for a percentage of his bonus if it is a regular income.
By setting things up this way you have a realistic goal to meet with CS so if you have a few months of the business not meeting profit projections his court ordered expenses are low and his bonus will reflect that as well. In other words you don't have a $5k cs payment and his income for the month is only $2k.
I have brought this up to DH.
I have brought this up to DH. He's got a few months to mull it over. I think your suggestion is the best way.
The problem with that formula
The problem with that formula is it doesn't allow a business owner to invest in his own company for growth....
Good point. I just think
Good point. I just think fathers get dealt a crappy blow in the courts as a whole when it comes to divorce involving children.
However, I think I might be
However, I think I might be in favor of a calculation for how much it costs to raise a child. I don't think we have that in our state, but it seems like it would be more fair to fathers. And could possibly keep moms from taking in large chunks of change each month that are far greater than what it takes for them to actually raise the child, thus giving them free reign to spend that money on themselves.
DH's child support is currently as much as our monthly house payment. Makes me sick to know she spends very little if any on my SD. It further makes me sick when I think of the fact that DH and I wanted a child of our own, but CS cuts into our budget so much that we decided against it because we can't afford it. I didn't want to take away from my child so that BM could have a new iPad. Infuriating.
He draws a salary, make it
He draws a salary, make it comparable to what he draws now. Also, don't tell her anything and maybe it doesn't come up and by then, he can afford the increase. Buying a new business is costly and the revenues may not be there the way you think. A new business usually doesn't draw a profit the first two years. Even the IRS recognizes that with the tax code. If it is an existing business, the revenues usually drop from the transition from one owner to another. I valuate businesses for a living and even if he thinks he is going in making an increase, more than likely he won't see it for awhile.
Everyone knows business
Everyone knows business owners can do magical things with numbers when it comes to reporting income. Not that I would suggest doing so, I just know that it can be done and is done constantly.
Don't slam business owners,
Don't slam business owners, they seriously are the life blood of this country. I see books all day long in S Corp and C Corps and LLC's. They are doing what they can do to make that business survive. He just has to give himself a salary comiserate with what he had and then do a large draw at year end and have it re-evaluated then. He has time to prepare and if he has months that are not good, it will balance out. But, I would not say a word to BM and let it be on her to have it re-evaluated.
So tired of Business owners getting a bad rap. If everyone could run a business successfully and work for themselves, they would. It is not easy work and yet the small businesses hire over 65% of the people in this country and get comments like that. Most of us work for companies that have 25 employees or less. Hence the term, small business.
Trust me, accountants and lawyers, do not let these business owners get away with anything. Mine actually tells me that I can not take that deduction or that expense all the time...
I will get off my soapbox now. But, I work in the industry that is taking such a bad rap because everyone wants there to be a fall guy and honestly we are tired of it....
Are you replying to me?
Are you replying to me? Because if so, I am a small business owner along with my husband. So is my father. Not giving anyone a bad rap. Don't read so much into online posts.
I am talking to you. What
I am talking to you. What you stated was a nice way to perpetuate a stereotype that business owners cook the books.
She can have DH's entire
She can have DH's entire income considered for CS purposes. So, incorporate, have the corporation own the business and pay DH a salary from the corporation. Any profits can roll back in to owners equity and he can take his profits after the Skids age out from under the CO. If you want to pull profits sooner than the expiration of the CO have his business hire you as an employee and pay you a bunch of money while DHs salary is relatively low. Make your title Internal Consultant. Consultants make big bucks and no one knows exactly what the do.
Be reasonable in setting DH's salary to avoid a Judge taking a deep dive in to the whole situation. Too little and it can cause problems, too high and he pays more CS.
IMHO of course.
Good luck.
So, incorporate, have the
So, incorporate, have the corporation own the business and pay DH a salary from the corporation.
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This is exactly what my father does. The OP has a lot of options, she just needs to education herself on them.
Yep, this is what I did when
Yep, this is what I did when I was in the restaurant and investment business. I incorporated (C), purchased restaurants, franchise areas and properties through the corporation and paid myself a salary. Far too many small business owners, particularly those who buy a small existing business, forget to pay themselves. If the business can't support a salary for the owner then the person shopping for the business has to revisit the decision to buy that business.
IMHO and experience of course.
Great topic. Does anyone
Great topic. Does anyone know if a C Corp is treated the same as 'self-employment', in terms of CS guidelines? Our CS guidelines talk about Self Employment, using gross receipts minus reasonable expenses, etc. But doesn't specify if this applies to C Corps. My DH has a C Corp, pays himself a reasonable salary, etc. We expect the business to grow, and would like to put the extra back into the corporation to build it, for example we might get office space. Not knowing how this works for CS, or how a judge will rule is crazy. How can one plan for the future without knowing what to expect.
You need to visit with a good
You need to visit with a good accountant. Preferably one your lawyer recommends. There are different deductions for S Corp and C Corp. I am an LLC and switching to a C-Corp as my revenues grow. But, it is because of the amount of money I can put away for retirement.