When you first started as an entrepreneur you may have experienced a degree of success that left you wanting more. So, you took on more responsibility, worked longer hours, and took bigger risks and even bigger loans to keep your business afloat while you built up a customer base and refined your business practices. While you were able to make payroll and achieve some successes in working as an entrepreneur it was all worth it in your mind since you were able to do all of this while also doing something that you love. Do something you love and you’ll never work a day in your life someone told you a long time ago.
Eventually, the business becomes even more of a success. You were able to create a profit for your company. Your employees are happy, and you have been able to put some money away for retained earnings and even take some money home for the household. Still, these successes did not come without a cost not only financially but regarding your home life. You are married and have a small child. The time alone with your little one has been a challenge for your wife, but she has managed it all with a great deal of aplomb. Or so you thought.
That was before you found yourself staring down divorce papers as you came home from work one day. You have been so focused on your work that you never truly considered that a divorce was a possibility. Sure, you knew in the back of your mind that you didn’t have the best or healthiest marriage in the world but to think that a divorce was on the mind of your spouse was anything but within the realm of possibilities as far as you were concerned. Now that you know a divorce is upcoming you are asking yourself a ton of questions.
Starting with: what will divorce mean to you when it comes to child support? While you have always made as much time as possible for your child you are also sure that your wife is going to be the primary conservator when the divorce is said and done. Not only has she been the primary caretaker for your son but given that he is only one year old you are not able to be able to act as his primary caretaker right now. You’ve never done that before, and you are unlikely to do so anytime in the future. What’s more- you are just figuring out how to parent and manage a business. The challenges aren’t going to become any easier now that you are going to be a single dad.
With all this hanging over your head you understand that child support is going to be a fixture of the divorce negotiations that you and your spouse engage in momentarily. Your wife knows that your business is getting to be more profitable, but she has no idea about the specifics of that. All she knows is that when she goes to the grocery store to buy formula for her kiddo there is money in the account.
Outside of that, she doesn’t know a thing about the business. Good or bad, right, or wrong this is how you all have managed your finances. That worked well for a period but now you are wondering what impact this could have on your divorce. Beyond figuring out how the money will be spent in a division of property scenario the question on your mind is how will child support work for your little one? What sort of liabilities could be in play for your family in a child support scenario?
Getting divorced as an entrepreneur means that you must think about issues that do not necessarily matter to people who work a 9-5 job. There are going to be custody issues that will matter to you because of the hours that you work. If you cannot see your child on a typical schedule, then you are in a position where it is going to be difficult for you to argue that you should be named as the primary conservator of your child. This would have been the main method that you could have used to avoid child support.
On top of that, you may have property division concerns due to the profitability of your business but also due to concerns that you have about the debt that you have taken out to get your business to a place where it is profitable. You must spend money to make money you heard from a guy with grey hair once. While that may or may not be true it doesn’t matter if you have a lot of loans in your name. The trouble is that it isn’t your business which is on the hook for the loans. Banks and other lends don’t lend money to start up small businesses. Rather, you signed on for those loans in your name. Since Texas is a community property state that could leave your wife open to liability as well. This is true even if the two of you are getting a divorce.
Finally, we get to child support. Child support in standard divorce is not complicated. Once you figure out your net monthly income you take a percentage of that based on the number of kids you have and then you have the child support that you are in line to pay. Easy, right? Well, not so fast. In a situation where you have a variable income- and sometimes no income at all it is not going to be so simple for you to figure out child support. Back-of-the-envelope math won’t work. You need something hard and fast to go by. The more prepared you are the better off you will be. Your spouse, who is set to receive child support, will surely be prepared. The question that you need to ask yourself is whether you will match her in terms of preparedness.
The best way for you to prepare for a divorce is to have an attorney who will stand up for you, your business, and your child- all at the same time. You can protect your finances; be the dad you want to be and not lose an arm and a leg in child support. The attorneys with the Law Office of Bryan Fagan can show you how to do it. We serve business owners in divorce cases with great frequency because we have a well-earned reputation for being tough, smart, and forward-thinking. Contact us today for a free of charge consultation to see what we have to offer you.
Child support can be simple. It’s a calculation for most people based on the guidelines outlined in the Texas Family Code. Simple multiplication helps you arrive at the child support that you will need to pay. Done and done, right? Well, for an entrepreneur this is a more complex topic given that you have an income that is not consistent, predictable, or possibly established to the point where we can say with any certainty that this is your net monthly income. One month your income may be high, the next low, and the following month you may have no income because taxes are due, or a piece of equipment broke.
So, you will need to be in a position where you can accurately calculate your income. Considering all the different factors that we have already covered you should be able to determine what a standard income is for you despite your having fluctuations from time to time. You are never going to be in a position, most likely, where you can say that your income will be “X” amount per month like a salaried employee would be able to. However, you can gauge the circumstances and decide about income when you look at your track record.
One of the aspects that play into this discussion is what your income is in terms of take-home pay. You may have been told somewhere along the line to pay yourself as little as possible to pay your bills and take care of essentials. The rest should be reinvested into your business or saved for a rainy day. At this stage in your business you may be able to determine a set schedule for you to take home money or your income may be variable. Depending on whether you had a busy or a slow month you may need to take less money home. If you are in a position where you have little cash in your bank account that could be due to your having reinvested the money into your business.
Why does this matter? Well, if your spouse ends up looking into the business as far as property division is concerned, she may want to take a chunk of the business given that she may be entitled to a portion of the community property share of the company. What should this tell you? It may be wiser for you to take home more money than you ordinarily would pay more in child support than give more to your spouse in the division of your community estate. Most parents would prefer to pay child support to their child rather than have that money go to their ex-spouse in a community property division.
Your true earnings may not be reflected in your take-home pay is the point that I am trying to make. This can be a situation that you need to watch out for whether you are the parent who will be paying child support or the parent who will be receiving child support. Both situations, quite frankly, demand that you hire an experienced family law attorney to assist you in this endeavor.
For one, you may need to position yourself to prove that your spouse earns more income than he or she lets on. If you are a parent who stands to receive child support, then you need to be able to dig into the numbers and determine your spouse’s actual net monthly income. If you are inexperienced at doing this, then you need help. An attorney from the Law Office of Bryan Fagan can help by requesting to discover your spouse’s earnings, his business, and any other source that may help to determine his or her true net monthly income. Asking your spouse for tax returns on him or the business is not good enough.
By the same token, if you are the parent who owns the business and expects to pay child support then you are in a position where you will need to be able to prove that your income is what you say it is. Your co-parent may do everything in their power to inflate your income by arguing that you are hiding assets, not taking as much home from the business as you could, and things of this nature. Some judges are sympathetic to that sort of argument. You need to be prepared in a hearing like that to be able to come forward with documentation to verify that your income is what you say it is. Without the help of an attorney, you may be ill-prepared to make this sort of argument.
It is difficult in many cases to be to compare the guideline levels of support in the Family Code to what your income is as a small business owner. It is not enough to just throw your hands up and say that you give up or that your spouse can take whatever she thinks is right in child support. While you want to be able to support your child as best you can that does not mean that your spouse should be able to receive more child support than is warranted given your income.
Rather, you should put forth the effort now to get the child support issue right. I would not recommend having an attitude that you can always come back and ask a judge to modify child support in the future. While it is true that you can potentially get your child support obligation reduced it is far from a sure thing. It is much more prudent to get the subject right now rather than anticipate being able to get a judge to change child support in the future.
A divorce can change how your business operates
Another faulty assumption that some entrepreneurs make in a divorce is that their business can largely be isolated from the proceedings of the divorce. While this may be true to some extent a divorce can have an impact on how your business operates. This is true even before we start to discuss how to calculate your income as a small business owner and other child support issues that almost surely will arise in your case.
For the most part, businesses tend to suffer when their lead person (you) is going into a divorce. In five years if you were to go back and look at the profits of your business you will likely see the profitability decrease before a divorce only to increase after the divorce is over. There are so many factors in your life that can impact the profitability of your business. These factors can distract you from running your business as you would have ordinarily. If you have children, then that is another factor that can lead to your business suffering in terms of having your attention diverted. That’s not to say that you should not focus on your kids. However, businesses demand full-time attention. If you are not able to give that level of attention at any one time, then the business can and likely will suffer as a result.
Your business will also suffer when your time is diverted for matters related to the divorce. That does not mean that you are constantly going to be busy with the divorce, but you will indeed have some matters that need to be attended to throughout your divorce. For instance, discovery questions need to be answered by you and then will likely need to be corrected in the future.
Coordinating with your attorney on matters before hearings, mediation, and trial are other times that you could ordinarily spend working on your business. It also happens that some people going through a divorce will find themselves in romantic relationships outside of marriage which can also take up their time. All of these are factors that may play into your case and your ability to devote your utmost attention to the business.
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