Divorce can lead to major disruptions in your personal and professional life, especially if you and your former spouse own a business together in Rhode Island. In addition to having a lawyer facilitate the divorce, it may also be necessary to enlist the services of a certified divorce financial advisor, or CDFA. A CDFA will work with divorcing couples and their lawyers to assess the monetary implications of settlement options in a divorce.
What divorcing business owners should know
When a couple is divorcing and they own a business together, they may be surprised by the ways in which the divorce proceedings could negatively impact the company. However, when individuals know what to expect, they can protect their financial interests and avoid serious monetary issues after the divorce, especially if the couple does not plan to continue running the business together.
There is a good chance that marital assets will be compromised in a divorce and that the money from the business is the household’s primary source of income. This can make property division difficult since income and assets are often points of contention in a divorce. It can also be challenging to determine each spouse’s take-home pay since the lines between business and personal matters are usually blurred in a family business.
Even though it assists with factors other than organizing the division of marital assets, the Tax Cuts and Jobs Act of 2017 offers some guidance by defining the meaning of “business owner income.” The definitions create a lower tax rate for a company owner’s income if they are an owner of an entity that is a qualified business.
Qualified businesses deduct 20% of the company’s income so that the max tax rate of 29.6% becomes the total taxable income of the business. The 20% is considered capital income.
Speak to a qualified Rhode Island attorney to learn more about property division as it pertains to divorce. Consulting with a lawyer may provide you with more information on which assets you are entitled to and how much you might owe to your spouse.