Child Support for Business Owners
Child support determinations are made based on a very specific formula as set forth in the Michigan Child Support Formula Manual. Although many factors are considered when setting the amount of the obligation, the first step in this detailed calculation is to establish the incomes of each parent.
For parents who are self-employed, business owners or executives, this determination can be complicated. Entrepreneurs may have different business expenses and perquisites (“perks”) that are part of the equation to determine incomes.
Generally, when it comes to child custody litigation, child support is the easiest issue to settle. Child support is based on the Michigan Child Support Formula which takes into consideration each parent’s income, child care and healthcare expenses, and the software calculates the support. However, it is very different when calculating child support for an entrepreneur or business owner. Very few business owners receive a regular paycheck. Some entrepreneurs never receive a paycheck; some of them reinvest all profits back into the business; some of them just take all income as shareholder distributions.
How is Child Support Calculated for Business Owners?
Regardless of how the entrepreneur is paid, the Michigan Child Support Formula requires that the market value of perquisites (perks) must be included in the business owner’s income. Some examples of the perks are housing, meals, personal use of company vehicles, cell phones, and mileage reimbursement.
The Michigan Child Support Formula also requires distributed profits, profit sharing, management or consulting fees, in kind income (i.e., personal use of business property), and redirected income (i.e., personal loans, some payments made to friends or relatives) to be included as the business owner’s income.
The difference in the monthly support obligation can be significant. For that reason, we work closely with forensic accountants to provide the court with an expert opinion to successfully obtain our clients’ requested goals.
The rules governing the determination of income are complicated, which is why it is only prudent to discuss your individual circumstances with a lawyer.
If you are a parent who is planning on filing for divorce from a business owner or an entrepreneur who earns income under special circumstances, you need an attorney who thoroughly understands the child support formula. We do. Contact the Kraayeveld Law team at 616-285-0808.