Does your salary matter in divorce if you own the business?

You’re a business owner in Collin County, Texas, and you’re going to get divorced. You’re wondering about the impact it could have on your company — with an emphasis on protecting your company — and wondering if your salary is going to have any impact.

It may. Though many business owners overlook this, experts note that you’re typically best off to give yourself a competitive salary within your industry. If you don’t, you spouse may then try to get compensation for the “lost” money.

For example, if you worked for someone else, you may earn $250,000 per year. Since you work for yourself, you typically spend about $50,000 per year and put the other $200,000 back into the company. You do this for five years before the divorce.

Now, your spouse may claim he or she lost out on $200,000 per year, for a total of $1 million over the five years that you were married and running the company. The idea here is that those were essentially family assets that you put into the company, so your family was really investing. Your spouse may then try to get $500,000 extra to make up for half of that money, which you both would have benefited from if you’d just paid yourself $250,000 per year.

Finances are often at the center of divorce cases, and it’s important to know all of your legal rights. Cases like this can grow very contentious, especially when one spouse feels wronged and the other is afraid the divorce is going to ruin the business that he or she has worked for years to build.

Source: INC, “How to Protect Your Business in a Divorce,” Jeff Landers, accessed May 16, 2017