Business Income in a Divorce
By Orlando Divorce Attorney Eduardo J. Mejias
Practicing Exclusively Family Law Since 2005
Business Income is Gross Income Minus Expenses
As any business owner knows, gross income is substantially offset by expenses such as employee wages, office rent, business supplies, business travel, etc. Accounting practice, tax rules, statutory law, as well as family law judges, recognize this and deduct those ordinary business expenses from a spouse’s annual gross receipts to establish a true business net income.
Chapter 61, Florida Statutes measures self-employment income as “gross receipts” minus “ordinary business expenses.” Incredibly, many clients and even family law attorneys still confuse the concepts of “gross” and “net” income embodied in this definition. On more than one occasion, an opposing attorney has pointed to the gross total of annual income of a client’s business account as irrefutable proof of how much that client “earned” that year.
What Qualifies As Business Expenses?
Not surprisingly, what exactly constitutes an “ordinary” business expense can occasionally generate controversy in a divorce. Business trips and meals, as long as they are not lavish in nature, usually qualify as legitimate business expenses. Conversely, if a client simply pays for a meal he had himself at Denny’s while on a business trip, he cannot deduct it from his income. Common sense usually prevails in these disputes.
Family Courts Require a Profit and Loss Statement
What do family law judges expect to see as a layout of a spouse’s business income? Chapter 61 actually requires a self-employed spouse to file a profit and loss statement (also known as an income statement), in addition to a financial affidavit. This “P & L” statement usually can either cover the last calendar year, or the first several months of the current year. Courts will also rely on a professionally prepared income tax return to measure a party’s business income.
What a family law court cannot do is simply estimate a business’s income based on conjecture. Nor will a family law judge simply accept a spouse’s self-serving and unsubstantiated estimate. With business incomes, only hard data will suffice.
Business Income Affects Alimony and Child Support Payments
Many of my divorce clients are leaving marriages involving a “family business.” Often, they were personally involved in helping their spouse run the business. Other times, one divorce client pursued a separate career, while the other spouse operated the business. In either case, in the divorce, the income derived from the business needs to be established with precision because it affects the amount of any child support or alimony payments.
How AAA Family Law Can Be Of Service
If you are a business owner involved in a divorce, I encourage you to call AAA Family Law at (407) 260-6001 and schedule a free thirty-minute consultation at our Altamonte Springs office.
At the consultation I will: (1) listen to the family law issues that you are experiencing, (2) propose to you a plan of legal action to meet your objectives and (3) quote you a fixed attorney retainer fee before you sign a contract or make any payment, not an hourly rate whose total is not predictable.
These are the ranges of attorney retainer fees at AAA Family Law. The actual fee depends on the complexity of the case. For more information on retainer fees see Retainer Fees.
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