How Are Businesses Divided in an Illinois Divorce?

 Posted on July 30, 2020 in High Asset Divorce

The division of property in most divorces is relatively straightforward, but when managing a high-asset divorce or a complex divorce, the task of dividing property and assets can get extremely complicated. The diversity of assets as well as the sheer value of each item can make these cases feel less like ending a marriage and more like settling a business dispute. In some situations, this is exactly the case — if one or both spouses own a business, the law requires it to be included in the division of property process. Whether you are a silent partner, a proactive founder and president, or anything in between, your spouse may be entitled to some of the value derived from your business upon divorce.

How Your Spouse Stakes Claim in Your Business—and How to Avoid It

To determine just how much that business is worth, both sides of the divorce case will typically conduct their own business valuation to calculate the precise monetary value of that business. If both sides cannot agree on the business’s value as well as what each spouse is owed from that value, the case might require additional business valuation litigation. In that sense, it certainly does become more involved than a typical divorce case. 

If you are the person who did all the work in creating, funding, and running the business, you may be wondering how your spouse can be entitled to any of its value in the divorce. Illinois is an equitable distribution state and recognizes separate property and marital property. Depending on the details of your business, your spouse may or may not be eligible to receive a cut.

If you started the business during your marriage, your spouse will be entitled to as much as half of the value of the business since it is automatically considered marital property. There are exceptions, especially if you are particularly savvy about protecting your business from divorce. For instance, you could:

• Sign a prenuptial agreement to maintain absolute ownership of any businesses you plan to start, or have already started, regardless of what happens during the marriage.
• Have your spouse sign a postnuptial agreement after the marriage in case he or she really does not want to fuss over the business, its valuation, and possible ensuing litigation.
• Set up a business ownership structure early in its inception, such as an LLC, partnership, or shareholder agreement, that explicitly addresses how to handle business partners who get divorced. Such business contracts could override the business valuation litigation of the divorce, essentially blocking your spouse’s stake in the company or forcing him or her to relinquish any ownership subsequently awarded.

If your business can be categorized as separate property, or property that you owned prior to the marriage, then it remains your property and is untouchable by your spouse in the divorce. However, one major caveat exists for those who get his or her spouse involved in the business. Anything from hiring your spouse to work for the business, using combined marital funds to keep the business afloat, or even taking advice or ideas about the business from your spouse can be seen as commingling your business with your marriage. This transforms the business from separate property to marital property, activating the usual Illinois laws surrounding the division of property for businesses.

Contact a Wheaton, IL Complex Divorce Lawyer

To spouses faced with a high-asset divorce, their business or professional practice might be the most valuable asset they own and could be up for grabs in the divorce process like any other asset or property. If that is the case, consider hiring a DuPage County business valuation litigation attorney. We understand complex divorces and business valuations and know which specialists and other resources to rely on for the best possible outcomes for our clients. Call the Andrew Cores Family Law Group today at 630-871-1002 to schedule a free consultation.

Sources:

https://www.yldivorce.com/wp-content/uploads/sites/1300620/2020/06/ISBA-Handbook-Chapter-21-Marital-Prop-Valuation.pdf

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm

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