While many Americans work for large companies, more and more are starting their own businesses—and for a variety of reasons. However, taking on this responsibility can mean extra headaches if you and your spouse ever wind up in divorce court. A business is an asset—in most cases, a marital asset—and like any other property acquired during the marriage, it must be valued and apportioned in accordance with the law. It may not be necessary to divide the business itself, but some manner of arrangement must be made that is equitable to both spouses.
Equitable Distribution and Asset Division
When left to the court to decide, asset division in Illinois is governed by the principle of equitable distribution. In other words, the state’s policy in divorce cases is to divide all marital property as fairly as possible. This means that unlike in community property states, the marital assets will not necessarily be divided equally; instead, they will be divided in the fairest method possible. If one spouse makes significantly more than the other, for example, the higher-earner may receive fewer marital assets because they have the means and the capital to acquire more.
While this system is aimed at granting each spouse a nest egg of sorts with which to establish himself or herself in single life, a privately owned business can present problems. An asset like a business does not lend itself to being easily divided without disposing of it entirely. If one spouse has built a business, or if both have contributed to its success, one or both may wish to retain their interests in it.
Valuation and Disposition
When dealing with asset disposition, the important thing to keep in mind is that your business, even if your spouse has no role in its day-to-day workings, is almost certainly marital property. An asset may begin as non-marital property, but if its proceeds are used in service of the marriage or commingled with marital property—as would happen if you deposited your take-home pay in the marital checking account—it can become marital property. Once a business is determined to be marital property, it must be properly assessed by an expert in business valuation.
There are multiple ways to evaluate the true net worth of a business, though the old-fashioned asset-based method is the most common. The most quantifiable information will come from this method, which is especially useful in instances where the spouses agree to divide and sell the business. Other methods include a market-based approach, but this is better suited to the times when one spouse decides to keep the business and instead grant equivalent marital assets to the other spouse to offset the value.
Need Assistance Determining How to Divide Your Business?
Family businesses are often very precious to their owners, given how much hard work they represent. However, there is a time to let them go, and a time to retain what you have built. If you have questions regarding how to evaluate your business in light of your divorce, the skilled DuPage County divorce attorneys at the Andrew Cores Family Law Group are happy to assist. Contact our office today to set up an initial consultation.