What Are the Options for Handling Your Business in a Divorce?

 Posted on January 08, 2021 in Divorce

When you own your own business, that business is your livelihood. For many small business owners, their business is like a baby they take great pride in producing, nurturing, and growing. However, all of that growth and success is jeopardized if you or your spouse seeks a divorce. Even if your spouse was never necessarily involved in the functions of the business, there is a possibility that he or she is entitled to a portion of the business’s value simply because of your marital status. Financial decisions made during your divorce can affect you for the rest of your life, so you should consult with a lawyer before you do anything. A skilled Illinois asset division and business valuation attorney can help you determine how you should handle your business when you are going through a divorce.

What to Do With Your Business

One of the most difficult decisions you will face during your divorce is determining what to do with your business. Typically, there are three options that are available to you: You can buy out your spouse’s share of the business and retain full ownership, sell the business and split the profits as is seen fit, or you can continue to co-own the business. There is no one right answer to what you should do; each family’s situation is different, so each solution will also be different. 

• Buying Out Your Spouse: The most favorable option for most people is typically to purchase their spouse’s share in the company, allowing them to retain complete ownership of their business. Before you do this, you will need to get a fair valuation of your business by a third-party professional to ensure you are not paying more (or less) than you should. However, for some, it is simply not financially feasible to come up with what is often hundreds of thousands of dollars in cash.

• Selling the Business: Another option -- often as a last resort -- is to sell the business rather than keeping it. Once you sell it, you and your spouse would split the profits in an equitable manner in accordance with the Illinois Marriage and Dissolution of Marriage Act (IMDMA). This typically is not a popular option, yet it is sometimes necessary during a divorce.

• Continue to Co-Own the Business: You and your spouse can also make an agreement to continue to co-own the business after the divorce is final. For couples who are on fairly good terms and who are able to be amicable with one another, co-ownership is not as outlandish as it seems. For most couples who continue to co-own a business after a divorce, one person runs the business and is involved in day-to-day operations, while the other person’s role as an owner is only to collect a portion of the profits.

Contact a DuPage County Asset Division Attorney Today

When you are a small business owner, getting a divorce can place a strain on your finances. At the Law Office of Ronald L. Hendrix, P.C., we can help you determine a fair value for your business, as well as providing you with recommendations as to what business-related divorce decisions would be in your best interests. To schedule a free consultation with our knowledgeable Plainfield asset division lawyer, call our office today at 630-355-7776. 

Sources:

https://www.americanbar.org/groups/real_property_trust_estate/publications/probate-property-magazine/2019/march-april/three-options-a-private-business-a-divorce/

https://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=2086&ChapterID=59