For business owners undergoing a divorce or paternity action, determining income for child support can be far more complex than for a salaried employee. This is particularly true for owners of “pass-through” entities like S corporations or Limited Liability Companies (LLCs), where company profits are taxed at the owner’s individual level, even if they aren’t fully distributed. Florida law seeks to ensure that child support calculations accurately reflect a parent’s financial capacity while also respecting legitimate business needs. A foundational Florida Supreme Court case, Zold v. Zold, provided crucial guidance, and a recent decision from the Sixth District Court of Appeal, J.E.J. v. S.A.B., 2025 WL 1909822 (Fla. 6th DCA July 11, 2025), offers important clarifications, particularly regarding “tax distributions.”
In Zold v. Zold, 911 So. 2d 1222 (Fla. 2005), the Florida Supreme Court addressed whether undistributed income from an S corporation, retained by the company for corporate purposes, should be considered “income” for alimony and child support calculations under Chapter 61 of the Florida Statutes. The Court observed that statutory definitions of “income” and “business income” focus on income that is available to a spouse.
The pivotal conclusion from Zold was that undistributed “pass-through” income retained by a corporation for legitimate corporate purposes does not constitute “income” under Florida law, precisely because it is not “available” to the shareholder-spouse to meet their financial obligations. However, if income is retained for “noncorporate purposes,” such as to shield it from the other spouse during a dissolution proceeding, it would be considered available income.
When the retention of income is contested, the shareholder-spouse bears the burden of proving that the undistributed “pass-through” income was properly retained for corporate purposes. Trial courts must consider three factors in this determination:
The principles established in Zold apply equally to LLCs that are taxed as pass through entities, as confirmed in the recent case of J.E.J. v. S.A.B., 2025 WL 1909822 (Fla. 6th DCA July 11, 2025). In J.E.J., the father, Jerome Johnson, was the majority owner, CEO, and board chairman of a Minnesota-based LLC called Energy Management Collaborative (EMC). The central dispute was how much of his EMC pass-through income should be included in his income for child support.
Johnson testified that EMC’s income was distributed according to a formula: the first 50% was used to pay shareholders’ income taxes, the next 25% was retained for reinvestment in the company, and up to the remaining 25% was distributed to members as determined by the board based on company cash flow needs. The mother, Stacy Bee, did not introduce evidence to refute Johnson’s testimony.
Applying the Zold corporate purpose test:
Therefore, the Sixth District concluded that Johnson had met his burden to prove the income retained by EMC served a corporate purpose and should be excluded from his gross income for child support calculations.
While J.E.J. affirmed the Zold rule for retained earnings, it introduced a significant clarification regarding the 50% of EMC income distributed to
shareholders specifically for their income taxes. Johnson had not included this “tax distribution” as income he received. The Sixth District found this omission incorrect, stating that the tax distribution was a “business income ‘payment to’ Johnson,” not income retained by the company. Even if used immediately to pay taxes, it was income Johnson received.
The court emphasized that while income tax liability is properly deductible from gross income, the tax distribution itself is part of gross income. Crucially, the Zold corporate purpose test only applies to retained income, not income that is distributed for a specific purpose.
This ruling puts the Sixth District in conflict with earlier decisions from the Second and Fourth Districts (Bair v. Bair, 214 So. 3d 750 (Fla. 2d DCA 2017), and McHugh v. McHugh, 702 So. 2d 639 (Fla. 4th DCA 1997)), which had supported excluding such tax distributions from income. The Sixth District certified conflict, signaling that the Florida Supreme Court may need to definitively resolve this point.
The J.E.J. case underscores the ongoing complexities of calculating child support when a parent owns a pass-through business. It reinforces that legitimately retained earnings for corporate purposes should not be counted as income available for child support. However, it clarifies that distributions made to the owner, even if earmarked for tax liabilities, are considered gross income, subject to the usual deductions for income tax liability.
If you are a business owner facing a child support determination, or if you are the other parent seeking support, it is crucial to understand these distinctions and how they may apply to your specific situation. This area of law is nuanced, and expert legal guidance is essential to ensure proper income calculations and fair outcomes.
Anthony Meehan Genova is a highly qualified legal professional specializing in family law, particularly known for his extensive experience in mediation and his commitment to community service. Mr. Genova is Board Certified in Marital & Family Law, a certification widely regarded as the “gold standard” for Florida lawyers. This certification signifies Florida’s official, independent determination of a lawyer’s expertise in a specialty field of law, a program officiated by The Florida Supreme Court and administered by The Florida Bar since 1982.
To achieve this esteemed certification, Mr. Genova demonstrated a dedication to achieving a heightened level of excellence through character, professionalism, ethics, and credibility. The rigorous process requires lawyers to have practiced law for at least five years, show substantial involvement in their chosen area of law, successfully pass a comprehensive examination evaluating a high level of knowledge, skills, and expertise, and undergo a rigorous peer-review process assessing competence, professionalism, and ethics. Additionally, board-certified lawyers must satisfy continuing legal education requirements that are more robust than those for general licensure. This certification is valid for five years, requiring continued practice and attendance of Florida Bar-approved continuing legal education courses for recertification. As of 2023, fewer than 5,000 lawyers in Florida, representing only 5% of eligible Florida Bar members, have earned board certification. Clients retaining a board-certified lawyer like Mr. Genova gain access to specialized expertise, professionalism & ethics, credibility, and a heightened dedication to excellence, with his rigorously evaluated experience offering assurance of a heightened level of proficiency in Marital & Family Law.
In addition to his board certification, Mr. Genova has been a Supreme Court Certified Marital & Family Law Mediator since 2019. He has been a dedicated member of the Executive Council of the Family Law Section of the Florida Bar since 2016, demonstrating deep engagement with the evolution and practice of family law through various leadership and committee roles: