North Carolina's Approach to Child Support and Business Income

Understanding Child Support in North Carolina

In North Carolina, child support is a legal obligation designed to ensure that children receive financial support from both parents, regardless of whether the parents live together. The state's approach to determining child support obligations is centered on the Income Shares Model, which aims to provide the child with the same proportion of parental income that they would have received if the parents had remained together.

This model considers various factors, including each parent's income, the number of children, and the custody arrangement. However, when one or both parents are business owners, determining income for child support calculations can become complex.

Business Income and Child Support Calculations

For business owners, 'income' encompasses more than just a salary. It includes profits from the business after necessary expenses are deducted. North Carolina courts closely scrutinize a business owner's reported income to ensure that all available resources are accounted for when establishing child support payments.

The key element in this scrutiny is differentiating between legitimate business expenses and personal expenses that may be disguised as business costs. Items such as personal travel, entertainment, or vehicle use may sometimes be inappropriately deducted from business income, which can reduce the apparent earnings of a parent and thus affect child support calculations.

Courts will often require detailed financial statements and may employ forensic accountants to dissect complex financial records. This rigorous analysis helps to ensure an equitable determination of a parent's true income.

Case Law Influencing Current Practices

Historically, North Carolina courts have grappled with cases where business income was at the center of child support disputes. In Clark v. Clark, a 1999 case, the North Carolina Court of Appeals highlighted the necessity for courts to carefully evaluate both parents' incomes, including benefits derived from self-employment or ownership interests in businesses.

In this context, benefits might include items like company cars or expense accounts that reduce personal living costs but do not appear as direct income. Such benefits must be added back into the income calculation to accurately reflect a parent's ability to pay child support.

Conclusion

North Carolina's approach to child support emphasizes fairness and the best interest of the child. When it involves business owners, this means taking a thorough look at actual income rather than simply accepting reported wages. While this process can be intricate and often requires professional appraisal of financial records, it is crucial for ensuring that children receive appropriate support from their parents.