The Paying Parent’s Business: How to Collect Child Support From Business Assets

California Child Support Recovery System | Justice Foundation

When the paying parent owns a business — sole proprietorship, LLC, corporation, or partnership — that business is both an income source for support calculation and a potential asset for enforcement of arrears. Penetrating the business structure to reach income and assets requires specific legal strategies that most custodial parents don’t know are available to them.

Business Income for Support Purposes

A business owner’s income for child support purposes is not simply what they report as salary. California courts look at the owner’s actual economic benefit from the business, including: salary drawn, distributions and dividends received, personal expenses paid by the business (vehicle, phone, meals, travel), business-provided housing or housing allowances, and perquisites that reduce personal living expenses. A business owner who draws a modest salary but runs their vehicle, phone, and meals through the business has income exceeding the reported salary by the value of those perquisites.

Subpoenaing Business Records

Business financial records — profit and loss statements, bank account records, tax returns including Schedule K-1 for pass-through entities, and client payment records — are all discoverable in child support proceedings. Subpoena the business’s bank accounts separately from the owner’s personal accounts. Business deposits reveal business revenue independent of what the owner reports as their personal income. For corporations and LLCs, subpoena the entity’s federal tax returns (Form 1120 or 1065) for a complete income picture.

Levying Business Assets

Business assets — equipment, inventory, accounts receivable, bank accounts held in the business’s name — are subject to levy to satisfy a judgment against the business owner in many circumstances. A levy on the business’s bank account can be served on the bank holding the business’s accounts in the same manner as a personal bank levy. For this reason, identifying and documenting the business’s banking relationships at a debtor’s examination is a priority step in business-owner enforcement. The Justice Foundation kit covers business income analysis, business record subpoenas, and business asset levy procedures in detail.