Will An Illinois Divorce Affect My Business?

 Posted on November 22, 2024 in Property Division

For business owners, protecting the future of their business is a critical personal matter. It represents years of hard work, sacrifices, and financial investments. However, during a divorce, the business could be considered a marital asset and may be subject to division. 

Whether a business is split or remains untouched can depend on factors such as when the business was established, each spouse’s role in it, and any existing protections. If you are concerned about what will happen to your business during your divorce, an Illinois family law attorney can offer personalized guidance to help you secure your hard-earned assets.

What Determines Whether a Business Is a Marital Asset?

In Illinois, marital property is any asset acquired by either spouse during a marriage, regardless of who holds the title. As a result, these assets are subject to equitable distribution in the event of a divorce. There are important distinctions to note when determining marital property:

• Assets obtained before marriage are usually considered non-marital property.

• Inheritance and gifts explicitly given to one spouse during the marriage can be non-marital property.

• Prenuptial or postnuptial agreements may classify a business as separate property.

How Is the Business Value Determined in a Divorce?

When a business is part of the marital estate, a valuation can be necessary to determine its worth. Illinois courts may require a financial professional to execute the business valuation, which assesses the value of aspects such as:

• Current market value

• Earnings and growth potential

• Assets and liabilities

Can I Protect My Business from Division in a Divorce?

Taking proactive steps to safeguard your business can be critical. Some strategies to consider include:

• Prenuptial or Postnuptial Agreement: This document can be invaluable, as it specifies whether the business is considered marital or non-marital property. These agreements are legally binding in Illinois, granted that they are fair and voluntarily signed by both spouses.

• Shareholder or Partnership Agreement: If the business has multiple owners, a partnership or shareholder agreement can include clauses restricting ownership interest transfers or buyout provisions in case of a divorce. 

• Separate Business Finances: When possible, avoid using marital assets like joint accounts or shared property to finance a business, as doing so may blur the lines between separate and marital property.

• Employment and Compensation: If your spouse plays a role in the business, clearly defined employment contracts and fair compensation can help show that their contributions were part of a formal arrangement rather than marital support. Proper documentation can help reinforce your claim that the business is independently managed.

What Are My Options If My Business Is Considered Marital Property?

If this occurs, there are still ways to minimize the impacts of the decision:

• Negotiate a buyout: Offering your spouse a buyout for their share in the business can be one solution. You might negotiate a cash settlement or offer other assets to "buy out" their interest in the business.

• Consider alimony and other offsets: This strategy can help you keep your business intact without significant disruption. Agreeing to a higher alimony payment or offering a larger share of other marital assets can help offset the business’s value. 

• Create a structured payment plan: If a buyout cannot be paid upfront, a structured payment plan allows you to retain complete control of the business while compensating your spouse for their share over time.

Contact a Kane County, IL Divorce Attorney

Protecting a business during divorce can be complex, but an attorney at Goostree Law Group can offer knowledgeable legal guidance. Contact a St. Charles, IL divorce lawyer at 630-584-4800 to learn more about protecting your future.