Owning a business can make determining income for spousal support more complicated than reviewing a paycheck. A spouse who operates an LLC may control when money is distributed, which expenses their company pays and how earnings appear on personal tax documents.
However, forming an LLC does not automatically shield business income from consideration in a spousal support case. When determining spousal support, courts may examine a business owner’s actual income and financial resources instead of relying on the income shown on a personal tax return alone.
Why can LLC income be difficult to determine?
A traditional employee usually receives wages that can be verified through pay stubs and tax forms. Business owners may have several potential sources of compensation.
For example, an LLC owner might receive a salary while also taking distributions from the business. The company could retain some profits rather than distributing them immediately. Certain legitimate business expenses may also reduce taxable income.
This does not necessarily mean the spouse is hiding money. Running a company involves genuine expenses, and taxable income is not always identical to income considered for spousal support purposes.
The circumstances become more concerning when business decisions appear designed primarily to make personal earnings look smaller.
What could raise questions about reported income?
Financial inconsistencies can lead to closer scrutiny. A spouse might report modest earnings while maintaining a lifestyle that seems difficult to support with that income.
Questions may also arise if the LLC pays expenses that provide a significant personal benefit. Records that may help clarify the financial picture include:
- Business and personal bank statements
- Tax returns and financial statements
- Payroll records
- Profit-and-loss reports
- Owner distributions
- Business expense documentation
If you believe that your spouse’s LLC business income is understated, a family law legal professional can review available financial information and determine what additional records may be appropriate to request.