Protecting Your Family-Owned Business During a DuPage County Divorce

Experienced Wheaton Area Lawyers Protect Family Owned Business From Divorce

A family business may be one of the most important assets a divorcing couple owns. Aside from its financial value, many owners are emotionally tied to family businesses, and consider working there a way of life. This is why it is so important for family business owners to take steps to protect their companies in the event of divorce.

There are options available to protect family businesses both before a divorce is imminent, and throughout the divorce process.

Options for Protecting Your Business Interests

Some couples wisely worry about protecting their business interests before the marriage even begins by using a well-drafted prenuptial agreement. Prenuptial agreements can be invaluable tools to ensure that the business remains solvent after a separation, and that it stays in the right hands.

Provided they meet certain legal criteria, prenuptial agreements (those entered into before the marriage takes place) and postnuptial agreements (those entered into after the marriage has occurred) are often used to dictate how businesses and personal assets will be distributed should the marriage fail. It might be possible to avoid expensive business valuation litigation in the future if proper steps are taken before a divorce.

To be enforceable, these agreements must be:

  • Carefully drafted in such a way that no coercion or deception is implied
  • Executed voluntarily and knowingly
  • Based on a complete and accurate disclosure of the business and personal assets of each party - agreements that are later discovered to be based upon purposefully incomplete or incorrect information are likely to be declared invalid
  • Fair and equitable - by no means does this force couples to split property 50/50 in a prenuptial agreement; it just means that the agreement cannot be unconscionable for either party

Another option that can be used to protect a family-owned business in the event of a divorce is to transfer control of the business into an irrevocable trust managed by a trustee. This will ensure that one spouse cannot try to sell off the business or its important assets to spite the other.

So-called "buy-sell" agreements are also valid pre-divorce options for protecting the stability of a family-owned business. These agreements give one spouse the option to "buy out" the other should a "trigger event" like one of the following occur:

  • Death
  • Disability
  • Divorce
  • Departure (the spouse decides to pursue another job opportunity, retires or is fired)

Buy-sell agreements not only spell out the circumstances in which interests in the business can be transferred, but also the scenarios in which a transfer (either by selling or giving away a portion of the business) isn't allowed. Buy-sell agreements in particular are useful to protect the name, goodwill and historical value of a family-owned business by prohibiting the owners from selling to people outside the family, something that might happen in the emotional aftermath of a divorce.

Proper Business Valuation is Key

It is vitally important that - in order for a fair and equitable property settlement to be made - that the business be valued properly.

If the business is being awarded to only one spouse, that spouse has an incentive to undervalue the business' worth in divorce settlement negotiations, while the spouse giving up their interest in the business has an incentive to overvalue its worth. This type of situation often makes the assistance of an outside financial expert helpful. Experts you may want to consult include an accountant, specialized business appraiser, broker or financial analyst.

A business valuation expert can also make sure a number of factors are accounted for in the determination of a business' value. For instance, many people don't realize that the worth of a business does not just entail its current fair market value; future sales, expansion and projected growth must also be considered.

Contact an Attorney for Advice

Additionally, it is important to consult with a knowledgeable family law attorney experienced in the areas of business valuation and complex property division. A lawyer can provide information about the best options based on your unique situation. Whether you are currently facing divorce, or simply planning for the future, an attorney can work to ensure both your rights and your business' interests are protected. The family attorneys at Andrew Cores Family Law Group are experienced in areas of business valuation and complex property division and can help you assess your situation to prepare for your future.


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