What Happens If My Spouse Is Self-Employed?

When a couple in New York decides to divorce, financial matters can quickly become complicated. This is especially the case if one spouse is self-employed. Unlike those who are traditionally employed, a self-employed person often has irregular income, complex business assets, and overlapping personal and professional expenses. This makes divorce proceedings more difficult, as New York courts will want to ensure that assets are split fairly.

If you are going through a divorce and your spouse's income comes from self-employment, it's best to work with a lawyer who is aware of the laws regarding this way of making a living. They can also assist with what happens if one spouse doesn’t disclose all assets?

Understanding Self-Employment in Divorce And How Business Income Affects the Process

There are many types of self-employment. A spouse might be a sole proprietor, own an S corporation, a C corporation, or have a sole proprietorship, part of a partnership, they might own a limited liability company, or they might be a freelancer or consultant. It doesn't matter what the setup is; the main question is this: What is the true income and value associated with that self-employment?

In general, a self-employed spouse often has more control over how their income and expenses are reported. Because of this, New York courts always look at financial documents closely to determine the most accurate picture of those spouse's income and finances. For more information, this divorce lawyer in Albany NY may be able to help.

Full Financial Disclosure Is Required When One Spouse is Self-Employed

New York laws require that both spouses offer a full financial disclosure during a divorce. This includes everything from their income sources and business records to their banks statements, federal income tax documents, self employment tax, any Social Security payments, and other net earnings.

When only one spouse is self-employed, the discovery process in the divorce becomes a lot more extensive. The other spouse's attorney might ask for the following:

• Business tax returns (usually the last three to five years) and personal tax returns they had to file

• Profit and loss statements (Schedule C) (different from wages)

• Bank account and credit card records and forms

• Invoices, contracts, and complete client lists

• Documentation of deductible business expenses they can claim

• Loan or debt information related to the business

The goal is to verify whether the reported income reflects reality. Courts are well aware that business owners, for example, can sometimes underreport income or classify personal expenses as business deductions. A regular employee can't really do this with their pay.

Determining True Income

Accurately assessing income is one of the biggest challenges when one spouse is self-employed. Courts in New York often use a combination of IRS tax documents, lifestyle analysis, and expert evaluations to establish what the self-employed spouse actually earns...not what they disclose.

Common factors considered include:

• Gross receipts they might deduct or total business income they gain

• Ordinary and necessary business expenses they are responsible for

• Personal expenses disguised as business deductions

• Unreported cash payments or “under-the-table” work as an employer

• Changes in income patterns before or during divorce proceedings

Forensic accountants are frequently brought in to analyze records and identify inconsistencies. Their findings can influence how much spousal or child support is ordered.

Property Division and Business Valuation

In a divorce involving a self-employed spouse, the business itself may be considered marital property — meaning it could be subject to equitable distribution under New York law, and though the other spouse might not get half, they may qualify for a fair part.

One of the rules of divorce is that the value of that business must be determined before dividing assets. This process is known as business valuation, and it’s often one of the most complex parts of a divorce.

Business valuation experts use several methods to assess worth, including:

• Income approach: Based on projected future earnings

• Asset approach: Based on tangible and intangible assets

• Market approach: Based on comparable business sales

If the business was founded or grew significantly during the marriage, the non-owning spouse may have a right to a share of its value, even if they were not directly involved in its operations. There are, however, exceptions.

In some cases, rather than dividing ownership, one spouse may receive a financial offset — meaning they get other assets or a lump-sum payment in exchange for waiving their interest in the business. It's important to note that once the business has been put into one spouses' name, there is no opportunity to get the business back. The decision is final and there are no other options.

Spousal Support Considerations

When calculating spousal maintenance (alimony) in Albany divorces, courts look at the income of both parties and, additionally, the standard of living established during the marriage. For a self-employed spouse, this can be tricky because income might fluctuate month to month.

Courts consider both actual earnings and earning potential. If a self-employed individual intentionally reduces business income to lower support obligations, the judge can impute income — essentially assigning a higher income level based on evidence such as prior earnings or lifestyle spending. This increase allows the other spouse to get a fairer outcome.

Factors influencing spousal maintenance include:

• Duration of the marriage

• Contributions made by each spouse to the household and business

• Age and health of both parties

• Ability of each spouse to become self-supporting

• Any misconduct affecting finances (such as hiding assets)

Child Support and Self-Employment

Child support calculations follow similar challenges. Because the New York Child Support Standards Act (CSSA) bases support on income, determining accurate income for a self-employed parent is critical.

Courts typically examine tax returns, business records, and personal expenses to uncover the true financial picture. If the court believes income is being underreported, it can use lifestyle indicators — such as car payments, vacations, or home expenses — to estimate what the parent actually earns.

The court’s goal is always the same: to ensure that children maintain financial stability and that support orders are fair and sustainable

How an Albany Divorce Attorney Can Help

Navigating divorce when a spouse is self-employed requires both legal and financial expertise. The attorneys at Divorce & Family Legal, LLC in Albany, NY, understand the complexities involved in uncovering true income, valuing businesses, and protecting each client’s interests. They can explain what happens if my ex wants to relocate with the kids?

Their team works with accountants, appraisers, and financial specialists to ensure accurate evaluations and fair settlements. Whether representing the self-employed spouse or the other party, their goal is to achieve a resolution that reflects each person’s rightful share.

When one spouse is self-employed, divorce in New York becomes more than a legal separation — it’s a financial investigation. Determining true income, valuing a business, and ensuring full transparency are essential for a fair outcome.

With the help of experienced legal counsel, divorcing couples in Albany can navigate these challenges with confidence. Divorce & Family Legal, LLC provides the knowledge, resources, and advocacy needed to protect both personal and business interests — and help clients move forward with stability and peace of mind.