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What You Need to Know as a Business Owner During Your Divorce

Posted on in Divorce

elgin divorce lawyerIf you own a business, it is probably one of your most valuable assets. After putting years of time and effort into building your business, you will want to make sure you can continue to own and operate it, no matter what happens. Unfortunately, a business can sometimes be a tricky issue to address when couples get divorced. If your marriage has broken down, or if you want to address what will happen if you choose to get a divorce in the future, you will need to be sure to understand how the ownership of your business will be handled.

Business Assets as Marital or Separate Property

The first issue that business owners will need to address is whether their business is part of the marital estate. Typically, if a business was founded or acquired after a couple’s marriage, it will be considered marital property, even if only one spouse was involved in starting and managing the business. In these cases, the business will be part of the property division process, and both spouses will have an equal ownership claim.

If a spouse had owned a business before the couple got married, it will usually be considered separate property. Since the business is not part of the marital estate, it will not need to be divided during divorce. However, if the business increased in value during the marriage, that increase may be considered marital property, especially if the non-owner spouse made contributions to the business. In these cases, the business owner spouse may need to reimburse the other spouse for the contributions that increased the value of their separate property.

Valuing and Dividing Business Assets

During a divorce, a business valuation will usually need to be performed to determine the full monetary value of the business. This will provide a full understanding of the actual value of marital and/or separate property. The business owner spouse can then determine the best options for dividing business assets.

If a spouse plans to maintain full ownership of their business, they will need to negotiate a property settlement with their spouse that will divide marital assets in a way that will allow them to do so. They may agree that they will own all business assets, while the other spouse will own other marital property of an equivalent value. If this will not be possible, the spouses may set up a payment plan in which the business owner spouse will pay off the other spouse for their share of the business over time. 

In some cases, spouses may choose to co-own a business after getting divorced, but when doing so, it is a good idea to create a partnership agreement that details their individual responsibilities while also allowing one spouse to buy out the other’s share of the business in the future. If no other options will work, spouses may choose to sell a business during the divorce process and divide any profits earned from the sale.

Contact Our Kane County Property Division Lawyers

Divorce can be complicated for business owners. The skilled attorneys at Ariano Hardy Ritt Nyuli Richmond Lytle & Goettel, P.C. can ensure that your rights and financial interests will be protected and advise you on the best ways to address this issue throughout the divorce process. Contact our Elgin divorce and business valuation attorneys at 847-695-2400 to schedule your free consultation.

 

Sources:

https://www.nfib.com/content/resources/legal/a-small-business-owners-guide-to-divorce/

https://www.inc.com/guides/2010/05/protecting-your-business-from-divorce.html

Illinois State Bar Association DuPage County Bar Association Kane County Bar Association DeKalb Bar Association
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