Divorces can be tricky when it comes to dividing assets. Having a business can add another layer of difficulty. Your business may be a source of family income or an asset. To avoid losing the business, you need to determine what it is and its value.
At Diamond Legal, we have experience helping Illinois couples through a wide variety of family law issues, including divorce. This article will discuss the ways that you can protect your family business during a divorce in Illinois.
Is the Business Marital Property?
To protect your business during a divorce, the first thing you need to determine is if the business is considered marital property. Marital property is property acquired after the date of marriage regardless of whose name it is in.
Even if it was a separate asset before the marriage, if your spouse helped generate an income or increase value after the marriage it could be considered marital property.
Illinois is an equitable split state. In an equitable split state, marital property will be divided equitably, this does not necessarily mean equally. An equitable division is what the court determines to be fair and equitable under the particular circumstances of your case.
For the court to figure out how to divide the business a value will need to be established.
What Is the Value of a Marital Business?
It can be challenging to establish a price on a marital business. However, this is crucial when determining each spouse’s equitable share. Different consultants and experts can help place a value on a business by using different methods such as:
- Asset approach: This method is based on factors such as the value of tangible and intangible assets such as inventory, accounts receivable, intellectual property, debts and liabilities.
- Income approach: This method is based on factors such as projected future earnings, profits, and cash flow.
- Market approach: This method is based on what other similar businesses in the same region have sold for.
How Is a Business Divided?
In some cases, a couple may have a prenuptial agreement before their marriage, which can address how the business will be split in a divorce settlement. If there is no such document, then spouses have other options such as:
- One spouse can “buy out” the other spouse’s share of the company;
- Both spouses can continue to co-own or run the company together, even after they are divorced; or
- They can sell the business to a third party and divide the profits.
Contact Diamond Legal
Regardless of what route you take, it is always essential to have legal guidance to ensure your rights are protected throughout the process. Located in McHenry, Illinois, Diamond legal can help ensure that your family business is protected during an Illinois divorce. Contact our office today to schedule your consultation.
DISCLAIMER: Any information contained herein is solely for informational purposes. While it is important that you educate yourself, nothing herein should be construed as legal advice or create an attorney-client relationship. For specific questions, we urge you to contact a local attorney for advice pertaining to your specific legal needs.
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