A spouse’s business can be a source of income throughout a marriage. It can also be a source of stress, as they may work long hours. In some cases, the stress of running a business might contribute to the failure of a marriage.
Other times, people who own businesses may divorce for unrelated reasons. Regardless of why people choose to divorce, they have to address certain important financial issues. Those concerns include property division and possibly also negotiating financial support.
A lower-earning or dependent spouse can ask the higher-earning spouse to provide them with spousal support to ensure a basic standard of living after the divorce. Business ownership is one of several factors that can complicate spousal support issues during divorce. How can a spouse’s business affect spousal support obligations?
Issues related to unpredictable income
Spousal support obligations depend on several key factors, including the income of both spouses and the duration of the marriage. When the spouse potentially paying support is a business owner or self-employed professional, their income may drastically fluctuate from one month to the next.
Their unpredictable income can make it more challenging to negotiate a fair amount of spousal support. There’s also reason for spouses seeking support to worry about the business owner intentionally under-reporting their income or stifling the company’s success to minimize their support obligations.
Concerns about a double dip
The courts have to consider income when deciding how much support is appropriate. Depending on the business valuation method used for property division matters, there may be allegations of a double dip.
If the valuation method looks at future company revenue, then the spouse who owns the business may claim that considering that income again for the purposes of spousal support constitutes a double dip. It is therefore critical to select the right valuation process and to review circumstances carefully before proposing terms for spousal support.
Dependent and lower-earning spouses facing a divorce where the marital estate includes a business may need assistance. Securing spousal support can be a challenge when the paying spouse is a business owner. People trying to ensure their financial stability after divorce may need help to secure a fair and reasonable outcome.
