In a divorce case, the concept and definition of “income” is not a simple matter. The calculation of a person’s earnings will depend on what relief is sought. If the court is deciding a spouse’s need or ability to pay alimony or spousal support, then the court considers the financial resources of each party and “any other factor necessary to do equity and justice between the parties” (Fla. Stat. §61.08). If the court is calculating child support, then the court bases the amount of support on the parties’ combined monthly available income (Fla. Stat. §61.30(6)). When determining attorney fees, the trial court must consider the “financial resources of both parties” (Fla. Stat. §61.16).
Divorce Income: Pass-Through Business
The definition of income becomes a bigger issue if either spouse is self-employed, works as an independent contractor, or is president of a corporation, because he or she is more likely to enjoy pass-through income, otherwise known as business income. “Business income” means gross receipts minus ordinary and necessary expenses required to produce income” (Fla. Stat. §61.30(2)(a)(3)).
In Zold v. Zold, the Florida Supreme Court held that the general definition of income applies when determining awards of alimony and attorney fees; however, business income is a consideration when determining child support. The Court excluded these funds because it expected they’ll be used by the business to cover its expenses and therefore not available to the shareholder spouse to satisfy court-ordered financial obligations upon dissolution of marriage. (911 So2d 1222, 1229 (2005)).
As one may expect, this distinction can be difficult for the spouses and the courts to accept. It takes an experienced lawyer to guide a client through these murky waters. If you are going through a divorce and have business income or believe your spouse has business income, your attorney must be aware of these distinctions. If you would like to set up a consultation with one of our attorneys, please call us at 904-353-7733.