The Impact of Divorce on Your Chicago Business

Divorce can be a tumultuous and emotionally challenging process, especially when business interests are at stake. For entrepreneurs and business owners in Chicago, navigating the complexities of divorce while safeguarding their business interests requires an understanding of the law and the advocacy of a skilled family law attorney. It is natural to worry about what will happen to your business during your divorce. Will you lose it all? Will you have to split it down the middle? Will you have to sell it for parts and share the proceeds? Below, we will explore the common concerns surrounding divorce and its impact on businesses in Chicago, and how the proper legal counsel can help ensure your financial interests are protected.

Understanding Marital Property in Illinois:

Under Illinois law (750 ILCS 5/503), marital property encompasses assets acquired during the marriage that were not gifted to or inherited by one of the spouses. All marital property is subject to equitable distribution upon divorce – this means that it will be split between the divorcing spouses fairly, though not necessarily equally.

The first step in determining what to do with your business in a divorce is to determine whether it is marital or non-marital property. When did you form your business? Was it prior to the marriage? Did you inherit the business from a family member? Business interests acquired or expanded during the marriage are typically considered marital property.

The timeline of the business is not the only dispositive factor, however. Even when a business is formed prior to marriage, it may grow, expand, or change significantly during the marriage, due to the efforts of both spouses. In these cases, an argument can be made that the contributions of both spouses, either financial or through their personal efforts or labor, have changed the nature of the business fundamentally into marital property.

Valuation of Business Assets

If you have determined that your business is indeed martial property, then the next step is to figure out how much your business is worth. With any asset that may need to be divided during divorce proceedings, it is important that a reliable valuation be conducted so you know how much the asset is worth.

You cannot split something up until you know precisely how big it is. Under Illinois law (750 ILCS 5/503(k)) the Court uses a fair market value standard to valuate businesses and other assets.

Utilizing a market-based approach involves comparing a business to similar companies that have been sold or valued recently. This method relies on market data and comparable transactions to gauge a business’s value relative to its industry peers. By analyzing market trends, industry multiples, and other relevant factors, one can derive a fair market value for the business. The Court may rely on the testimony of expert witnesses to evaluate these factors and determine the fair market value of your marital business.

Selling or Splitting the Business

Now that you know your business is marital property, and you have conducted a reliable valuation, your next step is to determine how to split that property between you and your soon-to-be ex-spouse. There are many different ways to go about this, including the following:

• You may be able to keep the business intact and offset the value due to your spouse by relinquishing other shared assets to them instead.
• You may choose to liquidate the business and split the proceeds.
• You may opt to maintain a shared interest in the business indefinitely.

There is no one-size-fits-all solution here. This is never an easy decision, and it will be highly fact-specific to your unique situation.

No matter which route you take, you must understand the tax implications and legal considerations before proceeding. Speak with your family law attorney and your tax or accounting professional to ensure you are protecting yourself from unnecessary liability.

Protecting Your Business During Divorce

There are some things you can do prior to marriage or even during marriage that can mitigate the impact of a future divorce on your business assets.

• Sign a Prenup: Prenuptial agreements, governed by Illinois law (750 ILCS 10), allow couples to determine ahead of time how marital business interests will be divided in the event of divorce. If you want to shield your business interests from being divided in a divorce, you can provide for that in a prenuptial agreement.
• Sign a Postnup: Postnuptial agreements, like prenups, can offer protection to designated assets, but these agreements are entered into during the marriage.

Additionally, establishing trusts and employing other legal mechanisms can shield business assets from divorce-related disputes. Speaking with an experienced divorce lawyer in Chicago is the best way to devise a plan for protecting your business assets.

Contact a Family Law Attorney in Chicago Today

Divorce presents unique challenges for business owners in Chicago, but having the right lawyer by your side can mitigate risks and protect your business interests. You have worked hard to create your business and keep it running, and you do not want to see it threatened merely because you are going through a divorce. Contact a family lawyer in Chicago to learn how best to safeguard your business assets. The team at O. Long Law, LLC, is skilled and experienced in all types of business and property valuation and division. We are prepared to walk you through the process of divorce while protecting what is important to you and your livelihood. Reach out to us today to schedule your initial consultation and learn more about how we can help.