One of the most common questions asked when someone is getting a divorce in Illinois is what will happen to their business. Dividing assets can often be difficult, but it can be even more complex when a business is involved. Let’s look at the basics of what happens in these types of divorce cases.
One of the first things that need to be done is a business valuation. Generally, both parties will conduct a business valuation of their own to try to get a better sense of how much the business is worth. If the couple can’t agree to the value of the business based on their valuation, this may need to go into litigation, as well.
Having an agreed-upon value of the business makes it easier to split the business in some cases. However, some spouses may both claim that they want the business. Whether this is something the court will agree to or not often depends on the amount of participation each spouse had in the company before the divorce. If one spouse never did anything with the business or did not have a significant role, it’s unlikely they would be awarded half of the business. However, they might be awarded monetary compensation that equals that amount.
Often, it will depend on how the business is classified. If you started the business before marriage and you didn’t use marital funds for the operation of the business, it will likely be considered solely yours. If you did use community funds for the business, it could comingle the business with the marriage, which would give your spouse more of a right to the business.
If you started the business during your marriage, your spouse could be entitled to up to half of the value of the business since it would be considered marital property. Illinois is an equitable distribution state.
Some things can be done to help keep a business safe in the event of a divorce. You might, for example, sign a prenuptial agreement or a postnuptial agreement with your spouse. You could also have a business ownership structure, such as an LLC or partnership, that addresses how to handle the business in the event of a divorce.
If you are going through a divorce and you want to know what you can do about your business, talk with Gandhi Selim Law as soon as possible.