The Business Owner Who Is “Broke” on Paper

How Florida Courts Look Beyond Salary When Deciding Child Support

A business can produce substantial revenue while its owner receives a modest paycheck. It can also be genuinely failing while tax records create the illusion of income. Florida child-support law requires more than reading one number from a tax return.

The short answer

For a salaried employee, monthly income may be relatively easy to identify. For a business owner, the salary is often only the beginning. Florida’s child-support statute includes business income, reimbursed expenses, and in-kind payments that reduce personal living expenses. At the same time, money retained by a company for a legitimate business purpose is not automatically personal income available to pay support.

The analysis is therefore neither “the tax return controls” nor “every dollar in the business belongs to the owner.” The court must determine what money was actually available to the parent, what expenses were truly necessary to produce income, what benefits reduced the parent’s living expenses, and whether funds were retained for a real corporate purpose rather than to shield them from support.

Why salary alone can be misleading

An owner may choose a low W-2 salary and receive additional money through draws, distributions, guaranteed payments, reimbursements, company-paid expenses, or shareholder-loan repayments. The business may pay for a vehicle, fuel, insurance, telephone, meals, travel, or housing costs that would otherwise appear on the parent’s personal budget. Florida law expressly includes reimbursed expenses and in-kind payments to the extent that they reduce living expenses.

The opposite problem also occurs. A pass-through entity may attribute taxable income to an owner even though the company does not distribute all of that income. The owner may owe tax on money that remains in the business to pay employees, purchase inventory, satisfy lenders, maintain operating cash, or fund necessary growth. Treating every dollar of taxable pass-through income as spendable personal income can overstate the parent’s actual ability to pay.

Florida’s definition of business income

Section 61.30 defines business income as gross receipts minus ordinary and necessary expenses required to produce income. That wording is broader than taxable salary and narrower than gross revenue. It also means that a deduction accepted on a tax return is not automatically a proper deduction for child-support purposes. The expense must be examined in the context of producing income and the parent’s actual financial circumstances.

Five different kinds of money that should not be confused

Salary and guaranteed compensation

Wages, salary, bonuses, commissions, and similar compensation are income. For many owners, however, payroll reflects only one channel through which value leaves the business.

Owner draws and distributions

Cash distributed to the owner is generally important to the support analysis, even when the payment is labeled a draw or a tax distribution. In a 2025 decision, Florida’s Sixth District Court of Appeal explained that a tax distribution paid to a pass-through entity’s owner was a payment to the owner and could not be treated as though the company had retained it. The related income-tax payment may affect allowable deductions, but the distribution does not disappear from the income analysis simply because the owner used it to pay taxes.

Retained pass-through income

Florida’s Supreme Court established an important distinction in Zold v. Zold. Undistributed pass-through income retained for a legitimate corporate purpose is generally not available income under chapter 61. If the retention serves a noncorporate purpose, such as shielding funds during the family-law case, it may be treated differently.

When the reason for retaining income is disputed, the owner has the burden to show a proper corporate purpose. Relevant considerations include the owner’s access to or control over the funds, legal restrictions on distributions, and, most importantly, why the company retained the money. Payroll, inventory, operations, loan requirements, capital needs, and prudent cash reserves may be legitimate. A sudden, unexplained change in distribution practices after separation may require closer examination.

Company-paid personal expenses

If the company pays an expense that the parent would otherwise pay personally, the payment may reduce the parent’s living expenses and therefore count as income or an in-kind benefit. The label in the general ledger is not conclusive. A “vehicle expense” may be entirely business-related, entirely personal, or mixed. The same is true of phones, travel, meals, insurance, housing, and credit-card charges.

Loans and shareholder accounts

Loan proceeds are not automatically income because borrowed money carries a repayment obligation. But the word “loan” is not magic. Courts and attorneys may examine whether there is a promissory note, stated interest, a repayment schedule, actual repayments, collateral, consistent accounting treatment, and a realistic expectation that the money will be repaid.

A recurring stream of money used to fund the owner’s household may deserve careful analysis, particularly when repayment is indefinite or controlled by a family member. A genuine business loan used to meet payroll during a crisis is different from an undocumented personal subsidy that functions like available support. The facts, not the label, control the inquiry.

The records that tell the real story

A personal tax return and financial affidavit rarely provide the entire answer. A meaningful review may require several years of business and personal tax returns, K-1s, profit-and-loss statements, balance sheets, general ledgers, business bank and credit-card statements, payroll records, owner-draw histories, accounts receivable and payable, loan documents, shareholder accounts, and records of distributions.

The purpose is not to bury the case in accounting. It is to reconcile four questions: What did the business earn? What did it need to spend to keep operating? What money or benefits reached the parent? What changed after the parties separated or support became an issue?

Cash flow, taxable income, and business value answer different questions

These concepts overlap, but they are not interchangeable. Taxable income is calculated under tax rules. Cash flow measures money moving through the business. Child-support income focuses on income and benefits available to the parent under section 61.30. Business value estimates what an ownership interest is worth. Using the same dollar for multiple purposes without analysis can create distortion, just as ignoring a genuine economic benefit can.

This is why a credible expert does more than announce a number. The expert should explain the source of the number, distinguish recurring from nonrecurring items, identify personal expenses paid by the company, account for necessary working capital, and avoid counting the same economic benefit twice.

What if the business really is failing?

Not every low salary is manipulation. Businesses lose customers, carry debt, face seasonal swings, and sometimes survive only through borrowed money. An owner cannot safely distribute cash that is needed for payroll, taxes, inventory, debt service, or operations. Florida law does not require an owner to destroy a legitimate business merely to create a distribution.

A distressed owner should document the problem with contemporaneous records, not just testimony. Declining revenue, aging receivables, lender demands, unpaid taxes, reduced distributions, owner capital contributions, layoffs, sale efforts, and credible cash-flow projections can distinguish a genuine crisis from litigation-driven accounting.

What if the owner controls the books?

Control matters because it may affect compensation, distributions, expense classification, and access to records. It is not conclusive. Even a majority owner may have partners, lender covenants, insolvency restrictions, contractual obligations, or legitimate business reasons not to distribute funds. Florida decisions emphasize that the purpose for retaining income can be more important than the ownership percentage alone.

When records are incomplete or inconsistent, the court may draw conclusions from lifestyle, bank deposits, recurring payments, and the owner’s failure to provide adequate financial information. A clean reconciliation is usually more persuasive than insisting that the financial affidavit must be accepted at face value.

Frequently asked questions

Is all money shown on a K-1 income for Florida child support?

No. A K-1 can include pass-through income attributed for tax purposes even when some income remains in the company. Retained income may be excluded if it was kept for a legitimate corporate purpose. Amounts actually distributed to the owner require a separate analysis.

Can a business owner deduct every expense shown on the tax return?

Not necessarily. Florida defines business income using ordinary and necessary expenses required to produce income. An expense may be permissible for tax purposes yet still include a personal benefit or fail to qualify as a proper deduction in the child-support calculation.

Do company-paid car, phone, or travel expenses count as income?

They can, to the extent they are reimbursements or in-kind payments that reduce the parent’s personal living expenses. Mixed business and personal use should be documented and allocated rather than treated as entirely one or the other.

Is money borrowed from a parent or family member income?

A genuine loan is not automatically income, but the terms and actual treatment matter. Courts may examine documentation, repayment, interest, accounting, the purpose of the advance, and whether a recurring payment stream is functioning as an available personal resource.

Can child support be based on a business owner’s lifestyle?

Lifestyle evidence can identify inconsistencies and lead to relevant records, but it is not a substitute for a supported income calculation. The goal is to trace the money and benefits, determine what was actually available, and apply the statutory rules.

The financial affidavit is the beginning, not the verdict

A business-owner child-support case should not begin with the assumption that the owner is hiding money, or the opposite assumption that the company’s books answer every question. The reliable approach is to separate salary, distributions, retained earnings, personal benefits, genuine debt, and necessary operating expenses, then reconcile those categories to the parent’s actual financial life.

If a closely held business, self-employment income, pass-through entity, or disputed loan affects support in your Florida family-law case, The Law Office of Laura A. Olson, P.A. can help identify the records and legal issues that should be addressed before a number is accepted or challenged.

Editorial source notes:

Florida Statutes section 61.30, business income, in-kind payments, deductions, and child-support guidelines

J.E.J. v. S.A.B., Sixth District Court of Appeal, July 11, 2025

Adams v. Adams, Second District Court of Appeal, applying Zold to retained pass-through income