Re: Noncustodial parent question about self employment

[Indyguy1]

Max wrote:

>Hi I'm self employed and my income varies widely from month to month. I am
>afraid that my ex will take me back to court for increase in child support
>because I am making more than when the order was made.

Has she said something that leads you to believe she is thinking about doing
this?


I also fear that
>she could ask for child support to be established based on "good
>months"....although in the field I am in there are times of the year when
>it is really slow.

Depending on your state they will look at the past 3-7 years of tax forms, all
months included.

I want to incorporate and pay myself a salary. My
>question is what is the best way to incorporate for the most protection? I
>know there is LLC, S-corp and C-corp but was wondering if there is anyone
>here who has experience in this.

You would be attempting to hide income to avoid a CS increase and you'll most
likely get caught, and perhaps be punished by the courts for the attempt.

>
>My plan, if I end up having some very successful months which exceed my
>necessary living expenses, is to turn around and invest the money into
>rental properties thru the business. If the corporation makes the money
>and then spends it on these before it ever gets to me, is there any way she
>can try to steal this money from me?

Steal? No. Have ALL of your income considered, even the sum you would be
attempting to hide, have used for a CS calculations? Yes.

The courts will look at the whatever years they request. If all of a sudden
your income drops and its in conjunction with the incorporation of your
business, all her lawyer will have to do is take one look at your business
returns and they'll see what you are doing. As the owner of the business the
fickled finger of fate will point directly at you. The courts will look at the
profits you assign to other aspects of your business as *your income*
regardless. They don't care if it is being used to improve your business. They
will tell you paying support comes before all else. And even if the courts
bought your story about how the money isn't really yours, they'd just imput
your income based on your pay history and industry standards.

If your looking to keep your CS at what it is now just say a prayer she doesn't
go in for a modification. If your looking to reduce it, you pretty much can
kiss that dream goodbye.

Mrs Indyguy
(who hates to be the bearer of bad news)


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[Don]

Max Mustermann > wrote in message nfo>...
> Hi I'm self employed and my income varies widely from month to month. I am
> afraid that my ex will take me back to court for increase in child support
> because I am making more than when the order was made. I also fear that
> she could ask for child support to be established based on "good
> months"....although in the field I am in there are times of the year when
> it is really slow.

Been there, done that to a point.

Depending on the degree of hostility between you and your x my guess
is your fears are well-founded.

You can hire an occupational consultant to provide an "expert"
assessment of your likely income. Your x conceivably could too, but
may feel not like spending the cash.

That at least puts an expert opinion on the record, which can somewhat
constrain the judge, even it if has to be appealed. Still, it is quite
likely they will grab your highest month and multiply by at least 12.
Unless you have a history of several years of income.

Depending on the nature of your business, most small companies
incorporate as a S-corp. It is inexpensive and the paperwork is not
burdensome. For other reasons, often having to do with cash flow and
liability issues, many law firms, for example and some consultants
incorporate as a Limited Liability.

The bigger issue between S-corp and LLC is who owns the corporation.
If it's you then the court is not going to buy this, at least if they
find out. And finding out is very easy.

A safer means is to have someone you trust and who is willing to take
on some risk for you to own the corporation and pay you a salary. This
of course has certain drawbacks both for them and for you.

Good luck,

Don

[Patrick Lee]

My suggestion is; if you can set-up business abroad, i.e. Europe, get
moving
before the State/Fed get moving after you.

[dl_144]

(Patrick Lee) wrote in message >...
> My suggestion is; if you can set-up business abroad, i.e. Europe, get
> moving
> before the State/Fed get moving after you.


Hello All, sorry to jump in here so late. I wanted to point out that I
have been doing very much the same thing that the OP asked about, and
I have been doing it for the last 4 years. I do not necessarily advise
anyone else to try this, but as I was paying 53% of takehome pay for
CS, and that worked out to about $3600 monthly, I had to do something.
My best advice is to move slowly, as sudden changes tend to make the
court take notice. Remember, by and large most judges are very smart
in regard to the law, but not so smart in other matters. This will not
work for everyone, but as I do primarily independent consulting, and
get paid via 1099, it works well for me.

It is not so very hard, here is my system:

I formed a LLC via the internet. This was trivial. Cost: less than $20
US Dollars. I got a federal tax id. Whenever I get a gig, I have them
pay me under this fed tax id. This bit is rather straightforward.

I formed a second company, as a wholly owned sub of the first. Also
done over the internet. Also very cheap. The name of this second
company should be rather common and rather innocuous, like "Eagle
Technologies" or "Lightspeed Delivery".
Use a PO box for the mail. Get a free internet account for receiving
faxes and sending email. Get a "pay as you go" cell phone with
voicemail for the business phone.

From the second corp, hire _yourself_. Create and sign an offer
letter. Pay yourself salary. Keep normal payroll records.

Here's the kicker: Every time I get a new gig under corp1, I sign a
new contract with myself from corp2. Every time I get a new gig under
corp1, I have corp2 offer me 5 - 15 % less than the last gig,
independent of the actual billable rate I am collecting in corp1. And
every single time I get a lesser paying job (which varies from 5
months to 2 years), I simply file a petition to have my CS adjusted to
the correct % of my new salary.

Sounds easy? Well it wasn't trivial, but it wasn't too hard. And I
have reduced my CS from nearly $3600 per month to less than $2000 per
month.

Part of the trick is that here in IL where my ex wife filed for CS,
the county judge I have to see when I go in to court is quite old
(elderly), and not very up on "techie" stuff. I simply decry the sorry
state of the IT industry, the unavoidable fact of shrinking revenues,
the terrible state of the economy, etc etc etc. I show my offer letter
and paystubs from corp2, and ask to have CS reduced to the standard
percentages. I declare that I wish I were making more so that I could
pay more CS, etc etc etc. Works like a charm.

My point is that the game is rigged, and it has been rigged for
decades. Trying to "fight" the system is madness, since as many many
men in this NG will tell you, "fighting" the system = financially
secure man loses everything. The idea is to outsmart, outmanuever, and
outwit the system, _within_ the system. When it comes right down to
it, the 2 people you have to outsmart are the judge and your ex wife /
her lawyer. Make sure your requested adjustments are small enough to
to avoid throwing a red flag. If I had asked to have my CS reduced
from $3600 to $1900 per month, the judge would have said "get
stuffed". But I asked to have my CS adjusted from $3600 to $3240. Then
to $2980. And so on. Small, reasonable adjustments. There is no rush,
you have years to pay this and don't need to fix it in 90 days.

And my ex wife's attorney is a lady that sells Mary Kay cosmetics just
as my ex wife sells Mary Kay. This is an older lady who basically
"practices law on the side". Not very bright either. So the point is,
play to your strengths and your opponent's weaknesses.

Now, my ex wife and daughter are able to live comfortably off of my ex
wife's part time job, as the $1980 I pay her every month is still more
than double what she makes at the Wal Mart pharmacy. And I have got
more than $40000 _in cash_ in a safe deposit box. Money I have
liberated from CS. By the time my daughter is 18, that amount will
have gone over $100,000

My daughter will have 4 years of college, a wedding, and a nest egg to
start her life with. If I had paid this money to my ex wife I am
absolutely certain that my daughter would have had none of these
things.

Outsmart, don't overpower. If you wait for the system to be reformed,
you will die penniless. Understand that once you figure out that the
system is rigged, everything else about the system makes sense. Happy
hunting!