Dealing with finances in a divorce can be a headache. Property division in California follows the community property rule; all marital assets are to be equally divided between the two spouses.
While this sounds simple, many things can quickly complicate this part of the divorce. One such complicating factor is self-employment income, which may not be as easily verifiable or predictable like a salary.
Today, many successful Californians are self-employed. Many have enjoyed greater earning capacity and may have accumulated significant assets as a result of their self-employment. Self-employment also gives you a lot of freedom and flexibility. However, when it comes to determining child support and spousal support amounts, it won’t be as easy as referring back to your W-2s. Refer to California child support guidelines to see how your self-employment income may affect your child support amount.
What makes self-employment income hard to account for in divorce proceedings, as well as other financial processes, is that your income is not all yours to take away. Self-employed people usually have substantial business related costs. What is problematic is while you have set guidelines on what business expenses to deduct on your income taxes and how, for family law purposes, not all these expenses will be recognized as valid deductions.
Since every business is different, consult with a divorce lawyer with experience in handling business assets in divorce. Child support and spousal support both take income heavily into consideration so it is important only your net income be counted. Because business expenses can run the gamut from office space to office parties, determining net income can be complicated. Similarly, you may have several different sources of self-employment income that may or not be regularly occurring.
Overall, getting all your income down on your schedule of assets and debts may be harder if you are self-employed. Your tax returns will be crucial in helping you determine your income, as will a complete account of your business expenses. If you keep good records or have a good accountant, determining your net income for the purposes of determining child support or spousal support should be doable but will take some effort and calculations.
Are you in the Los Angeles area and have questions about self-employment and divorce financials? Certified Family Law Specialist Mark H. Karney has experience representing high net-worth individuals and handling complex divorces involving self-employment income in Los Angeles County. Serving Los Angeles and surrounding areas, California family law attorney Mark H. Karney offers efficient and tenacious legal counsel. Call our office at 310-564-5710; email us at intake@cfli.com or contact us through our online form today to schedule a free consultation.