Can selling a business affect your child support obligations?

On Behalf of | Apr 17, 2024 | Modifications And Enforcement

There are many reasons to sell a business in Massachusetts. They include a return on investment, a change in priorities and business challenges.

However, parents who pay child support might wonder about the effect of the business sale on their child support obligations.

Income from the sale

About 697,585 small businesses operate in Massachusetts. Selling one of these businesses could significantly impact various aspects of a parent’s financial situation. Massachusetts bases child support on several factors, including each parent’s income and earning potential.

The income from selling a business can substantially increase a parent’s total income for the year. This influx of funds may lead to a reassessment of child support payments. The court may consider the selling proceeds as part of the parent’s overall income.

Potential increase in child support

If the sale results in a considerable profit, the parent selling the business may need to pay higher amounts of child support. Massachusetts courts consider all sources of income when calculating child support. A significant windfall from selling a business could lead to an upward adjustment in support payments.

However, it is important to consider not only the income from selling a business but also any associated expenses. Massachusetts courts may take into account any debts or expenses incurred as a result of the sale.

Change in earning potential

Selling a business could also impact a parent’s earning potential. If the parent no longer has the income from the business, their earning capacity may change. This could result in a modification of child support obligations based on their new financial circumstances.

Financial disclosure

In Massachusetts, both parents must disclose their financial information during child support proceedings, including modification requests. This includes any income from selling a business. Failing to disclose such income could lead to legal consequences and potential adjustments to child support orders in the future.

Selling a business in Massachusetts can indeed affect a parent’s child support obligations. It is important for parents to understand the potential impact of selling a business on their financial responsibilities toward their children.