Every kind of divorce can raise some complicated questions that must be answered, but when you receive your income as the owner of a small business, things can get even more complex. One of those complex questions is: "How will child and spousal support be calculated based on my business income?" If you're in Texas, this guide aims to shed light on this important issue.
Understanding Texas Law on Child and Spousal Support
Texas has specific guidelines when it comes to child and spousal support, often known as child custody and alimony. For child support, the court typically bases the calculation on the non-custodial parent's income. Spousal support, on the other hand, is generally decided after considering multiple factors including financial needs, educational levels, and employment history.
Business Income as a Factor
When you own a small business, your income can be more complex to assess than a standard W-2 worker. Not only do you have your own salary, but you may also have business profits, assets, and even losses. All of these will be considered when determining your ability to pay child and spousal support.
Gross Income vs. Net Income
It's crucial to understand the difference between gross and net income, particularly when you own a business. Gross income includes all earnings before expenses, while net income is what you actually take home after expenses. Texas courts generally consider your net resources, which may include both your take-home pay and a share of the business income if it is not reinvested or obligated for business expenses.
Business Expenses and Deductions
It's common for business owners to reinvest profits back into their businesses. In such cases, these reinvested funds may not be considered as "available income" for support calculations. However, the court may closely scrutinize your business expenses to ensure they are legitimate and not artificially inflated to lower support payments.
Special Child Support Considerations for High-Income Earners
In Texas, child support guidelines only apply to obligors with a monthly net income of up to $9,200 per month (this amount is valid until 2025 when it will be adjusted up for inflation). If your income exceeds this, the court has the discretion to consider the child's "proven needs" and may order higher payments based on a variety of factors, including lifestyle and the child’s accustomed standard of living.
Consult a Qualified Attorney
Calculating child and spousal support based on business income is a complex matter that requires specialized knowledge. Therefore, it's essential to consult with an experienced divorce attorney who understands both Texas law and the intricacies of owning a small business.
If you have more questions about how your small business will affect child or spousal support in a Texas divorce, please don't hesitate to reach out to our team for a personalized consultation.
Attorney Sean Y. Palmer has over 20 years of legal experience as a Texas Attorney and over 25 years as a Qualified Mediator in civil, family and CPS cases. Palmer practices exclusively in the area Family Law and handles Divorce, Child Custody, Child Support, Adoptions, and other Family Law Litigation cases. He represents clients throughout the greater Houston Galveston area, including: Clear Lake, NASA, Webster, Friendswood, Seabrook, League City, Galveston, Texas City, Dickinson, La Porte, La Marque, Clear Lake Shores, Bacliff, Kemah, Pasadena, Baytown, Deer Park, Harris County, and Galveston County, Texas.
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