Support for a Self-Employed Payor
Owen and Sara divorced after 14 years of marriage. Owen owns a incorporated consulting business. He pays himself a modest salary of $70,000 but the business generates about $260,000 annually after expenses, and he has historically taken dividends and retained earnings. Sara earns $45,000. Their child, age 11, lives primarily with Sara. Owen claims his income for support purposes is $70,000 and that business retained earnings are not available to him. He also says Sara should be imputed income because she works part-time by choice. The jurisdiction uses a child support guideline based on the payor's total income, including dividends and available corporate funds, and allows imputation of income.
1. How should Owen's income be determined for child support?
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The court would look past the salary to Owen's total income. For a self-employed payor, guideline income typically includes pre-tax corporate income available for personal use, dividends, and retained earnings the payor controls, less legitimate business expenses and amounts needed for reinvestment. Owen's $260,000 in business income after expenses, combined with his control of the corporation and history of taking dividends, suggests his guideline income is closer to the corporate income than to his $70,000 salary. He bears the burden of showing retained earnings are genuinely required for the business, not simply sheltered. A court may average income over several years to smooth fluctuations and may add back personal expenses run through the company. The guideline amount would then be calculated on the higher figure, with a possible adjustment if the child's needs or the shared parenting arrangement require it.
2. Should income be imputed to Sara because she works part-time?
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Imputation is discretionary and requires evidence. Sara earns $45,000 and cares for an 11-year-old; part-time work may reflect caregiving responsibilities, not a deliberate choice to under-earn. The court would ask whether she has the capacity, education, and opportunity to earn more, and whether her caregiving justifies the current arrangement. If she has always worked part-time to manage the child's needs, imputation is unlikely. If she reduced hours without justification after separation, the court might impute some income. Even if imputed, the effect on Owen's obligation may be modest compared with the increase from his corporate income. The court would also consider the child's standard of living and the disparity between the households.
3. What disclosure and enforcement steps would help Sara?
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Sara should seek full financial disclosure: corporate tax returns, financial statements, shareholder loans, dividend records, and personal tax filings for several years. She could request an assessment by a forensic accountant if the records are incomplete. If Owen fails to disclose, the court may draw an adverse inference, impute income, or award costs. Enforcement tools include a support order registered with an enforcement agency, garnishment of dividends or corporate payments, and a requirement that Owen report changes in income annually. A court may also order security or a charge if there is a risk of non-payment. The goal is to base support on Owen's real ability to pay, not his accounting choices.