What do entrepreneurs need to know about spousal maintenance?
Unsurprisingly, the challenges of being an entrepreneur do not stop at work and spill over into marriage, and inevitably in to the divorce process. Being an entrepreneur comes with a whole host of uncertainty. This uncertainty may mean odd or long working hours, unreliable paydays, or large start up costs. Any one of these things would be taxing on a marriage but in unison they might be a death sentence for a marriage.
If an entrepreneur is involved in a divorce there may be great difficultly calculating their income or assets for settlement purposes due to inconsistent earnings, poorly kept records, and lack of liquidity. These unique challenges make the calculation of spousal maintenance tough. Spousal maintenance is payment from the higher earning spouse to the spouse that is deemed dependent or who has sacrificed income to be a caretaker, etc.
Calculating income for an entrepreneur is highly dependent on the type of business or industry they are involved in. Have they begun turning a profit? Is their product available for sale or it is in development stages? In the case of entrepreneurs supplemental financial documents are crucial when calculation income. Past taxes, asset records, cash flow statements, loan applications and business proposals are all helpful tools in determining their true income. It is likely you and your spouse will not agree on income and it is common that the entrepreneur believes he/she ears less than they do and should be required to pay less in maintenance than their income dictates. It is important to seek professional guidance in this calculation proves because a mistake could be catastrophic to either the entrepreneur or the dependent spouse requiring maintenance for their subsistence.
An entrepreneur may want to ensure that the amount can be altered if there is a sudden or unexpected change in the entrepreneur's income that would preclude them from paying the previously ordered amount. It is important to consider tax implications with spousal maintenance payments. There are ways to either have spousal maintenance payments deducted from the payers taxes, and taxed for the receiver, or to remove tax implications entirely through agreement between the two parties during a settlement. There remain several more tricky potential tax implications with spousal maintenance that are important to discuss with a legal and/or tax expert.