How is Business Asset Division Decided in an Illinois Divorce?
While some assets are easy to split (such as savings accounts and cars), others, such as a business and its assets can be challenging to disperse.
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How to Determine If a Business Is Marital Property
A business that starts after marriage is considered marital property by the court. A Rolling Meadows business asset division lawyer will tell you that you will be asked these questions to determine that:
- Did the business start before or during the marriage?
- If the business started before the wedding, did it use any funds from joint accounts?
Unless specific steps are taken to separate the business legally from the marriage from the outset, which will be discussed later, the court will consider it marital property. This has to be done before the wedding.
Your spouse doesn’t have to contribute funds to your business to get a valid claim on it. Even something as small as suggestions and ideas over breakfast can be taken as proof that they had a hand in business development and thus have a stake in your enterprise.
How Much Each Spouse Can Get During Business Asset Division in an Illinois Divorce Case
The million-dollar question business owners have is whether their spouse will receive a portion of their business post-divorce. If so, how much? When the time comes to divide assets, your enterprise will probably be considered an asset during asset division.
It is up to the court to decide whether the business should be considered an asset or not. If the court is responsible for dispersing these, they will base their decisions on the Illinois Marriage and Dissolution of Marriage guidelines (IMDMA). This means that they will not distribute assets straight down the middle. Instead, they will consider these factors before doing a fair split:
- The financial health and income of each spouse.
- The contribution of each spouse to the business.
- Whether either party made any contributions to the marriage as a homemaker.
- The duration of the marriage.
- Whether or not either of the parties tried to disperse or waste any marital assets.
- Whether any of the spouses contributed to the acquisition of the business
- Tax consequences of property division.
- The property value assigned to both parties.
- Child custody arrangements.
- The economic circumstances of both parties before and after business or property division.
- Whether the division is in addition to or is to be used for spousal maintenance.
Choosing a Business Valuation Method
Suppose you and your spouse’s Rolling Meadows business asset division lawyers have concluded that the business should be divided as part of the divorce settlement. In that case, you have to figure out what it is worth first. There are several methods you can use to do this. Each one perceives the enterprise from a different angle, and each has its pros and cons.
An experienced Rolling Meadows business asset division lawyer can help you determine the best evaluation method for your situation. Here are some of them you can look into:
Income-Based
This is one of the most popular business valuation methods for determining the worth of an enterprise in a divorce case. In this approach, your company’s past and current financial health will be analyzed to forecast its future success and how much it will be worth by then. This is done with an in-depth evaluation of your company’s cash flow, profits, and expenses compared to its past performance.
Asset-Based
An asset-based approach is slightly different from an income-based one in that it focuses on on-hand company assets rather than its revenue. In this valuation, the tangible and intangible assets of your business will be taken into account. The former include inventory, vehicles, computers, office equipment, etc. The latter includes accounts receivables, trademarks, copyrights, and other non-physical items.
If this method is used, it would be best if you have a financial professional on your side who can help you distinguish between these two assets.
Market-Based
A market-based approach values a business the same way that homes are evaluated before being placed on the market. The evaluator looks at the price of other similar companies and how well they have sold recently.
However, there is a caveat with this type of approach. Finding a similar business that is for sale at the same time you are going through divorce proceedings is rare. That is why this evaluation method is rarely used. However, a Rolling Meadows business asset division lawyer can let you know if it is a feasible method for your particular situation. You may miss out otherwise.
Protecting Your Business from Future Issues Post Divorce
Once you have figured out how the business will be split up during the divorce, your job isn’t over. The next thing you should do is ensure it is protected from future disputes or another potential divorce. Here are some ways you can do that:
Prenuptial and Postnuptial Agreements
Making your spouse sign an agreement is the easiest way to ensure that your enterprise (or what is left of it after the divorce) is protected. Make sure you do this before you marry again using a prenuptial agreement. The agreement confirms business ownership and its distribution terms, and any other assets that you and your future spouse may own.
If you fail to sign this agreement and get married again, you can always get a postnuptial agreement drafted and signed. The only difference between this agreement and a prenup is when they are signed. This is why prenuptial agreements are easier to uphold in court during a divorce. However, both options can protect your enterprise if you split with your spouse again. The bottom line is that if you want to retain your business after separating from a spouse, you should get them to sign an agreement before it is too late.
Maintaining Full Control or Selling the Business Post-Divorce
Even if your spouse is not part of the business, the court would consider it marital property if you started it during your marriage. In this case, your spouse will be entitled to a portion of its value. However, if you want to maintain complete control over it, you can ‘buy out’ your spouse by buying their entitled amount from them.
Also, keep in mind that the judge will consider the current value of your business and the revenue it generates as per likely future growth to determine spousal support and child maintenance obligations.
If your business can be categorized as separate property or property you owned before you wed, your spouse cannot touch it during your divorce. However, the court can also decide that it would be best if the business is sold. That may be the case if neither of the spouses wants the business or one or both of them want it, but it is not doing well enough to compensate the spouse who has to leave it.
A forced sale of a viable business is frowned upon, but the court may order it in certain limited situations. If the spouses have a business relationship that can survive after the divorce, they can resolve asset and property issues outside of court via mediation or other methods.
Contact The Law Office Of Fedor Kozlov For A Consultation Today
If you are looking for experienced and compassionate Rolling Meadows business asset division lawyers, contact us at the Law Office of Fedor Kozlov today. There is no need to evaluate your business on your own when we have our financial experts who can do it accurately. By choosing our lawyers, you will have the best chance of protecting the business you worked so hard to set up.
Our attorneys will work closely with you and finance professionals to get an accurate valuation for your business. Based on the details and circumstances surrounding your divorce, we will create efficient strategies that can help us defend your rights.
The main aim of our law office is to give clients the legal counsel they need to protect their business assets and ensure they can get back on their feet fast post-divorce. You spent years building it and making sure your employees are paid. You deserve to retain as much as possible, if not your whole enterprise so that you can have a stable future. Our lawyers will be more than willing to make that scenario a reality.
We understand how emotionally and financially devastating the process can be, and we also understand how Illinois laws work when it comes to fair and equitable asset and business division. Allow us to put that knowledge to work for you. We are more than ready to put that knowledge to work for you so you can rest easy knowing your case is in good hands. Get in touch with us for a consultation by calling (847) 241-1299.