How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Barrister Your Own Question
Barrister
Barrister, Lawyer
Category: Family Law
Satisfied Customers: 37399
Experience:  Attorney with 16 years experience
19958803
Type Your Family Law Question Here...
Barrister is online now
A new question is answered every 9 seconds

If I start a business as a s Corp and pay my self a

Customer Question

If I start a business as a s Corp and pay my self a reasonable salary. Is the business income used to calculate my child support?
Submitted: 1 year ago.
Category: Family Law
Expert:  Barrister replied 1 year ago.

Hello and welcome! My name is ***** ***** I will try my level best to help with your situation or get you to someone who can.

.

Is the business income used to calculate my child support?

.

Any income that the business earned passes through to you as the owner of the S Corp so it would be included in your "income" for calculation of child support. Income used in Texas for child support includes the following:

  • salary and wages
  • interest, dividends, and royalty income
  • self-employment income
  • net rental income
  • all benefits received, such as severance pay, retirement, pensions, trust income, annuities, capital gains and other government benefits.

.

So yes, that income would be included along with any other income or benefits that you receive in total and go into the child support calculator.

.

.

thanks

Barrister

Customer: replied 1 year ago.
Why is that? I don't receive all the income the business does. Why would I be responsible to pay child support because of what the business makes? I can't just take the money the business earns, that would be a crime. So why is it used to calculate it?
Customer: replied 1 year ago.
I am a w2 employee of the company.
Expert:  Barrister replied 1 year ago.

Let me clarify. If you are the owner of the company, then while you may be a W2 employee, you are also the person that any net profit funnels down to. So if the company sells $200K of X and has $150K in expenses including product costs and wages, that leaves $50K in profit (i.e. income). That money passes through to the owner of the Sub S Corp under IRS rules. So it really isn't the income that is attributed to you, but rather the profits over and above any expenses.

.

So if you are being paid a salary from the company, then you as the owner also get the profits from the company and that is considered income to you and would factor into any child support calculation.

.

.

thanks

Barrister

Customer: replied 1 year ago.
then I can legally spend all the profits personally?
Expert:  Barrister replied 1 year ago.

Yes, that is one of the main reasons someone starts up a Sub S....they get the corporate protection from personal liability but they are taxed on any profits at their personal rate, not a corporate rate, because all the profits "pass through" the Sub S down to the owner directly.

.

So the owner is protected from liability while only paying taxes at their lower personal rate.

.

But it wouldn't affect any child support calculation by having the Sub S because whether you pay yourself $50K and the profits of $50K come from the Sub S or whether you pay yourself $100K and there are no profits, the same $100K is considered income to you regardless.

.

.

thanks

Barrister