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How Is a Family Business Handled in an Illinois Divorce?

Posted on in Divorce

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Property division during divorce can vary significantly in its complexity. If a divorcing couple does not own a home or significant assets, the division process is typically more straightforward. However, if the couple has complex assets such as a family business, the division of property will be much more complicated. Illinois courts use a method called “equitable distribution” to split marital assets and property. This means that the marital estate is divided fairly based on each of the spouse’s contributions to the estate, their financial circumstances, and other relevant factors. Before a family-owned company can be divided in a divorce, the value of the business must be determined. There are several different ways to perform a business valuation, so read on to learn which option will work best for your situation.

Determining the Monetary Value of a Business

The business valuation method used by a couple during divorce will depend largely on the couple’s plans for the business moving forward. If the couple is going to sell the business, one way to determine the value of the business is by comparing the business to similar companies that were recently sold. This is referred to as a “market approach.” Another way to value the business is to use an “asset approach.” This involves calculating the total value of the assets owned by the business and then subtracting the business’s liabilities. In an “income approach” to business valuation, the present value of projected future income is used to determine the value of the company. 

Business Options After Divorce

If the couple does not wish to sell the business, one spouse may choose to take ownership of the business and “buy out” the other spouse. A buy-out could be structured as a lump sum cash payment or fixed payments made by the spouse who takes over the company to the other spouse. The buy-out could also be accomplished by awarding the non-owner spouse a greater share of the remaining marital assets so that each spouse walks away with an equitable share of the marital estate.

If a divorcing couple has a reasonably agreeable relationship, they may choose to keep the business and continue managing it together. Although it can be difficult to have a business relationship with an ex-spouse, many partners have invested too much time and energy into a business to simply walk away from it. If a couple chooses to continue jointly operating their business after they are divorced, they will need to determine how contracts should be updated to reflect the new circumstances and reevaluate each partner’s role in the business.

Contact a Hinsdale Divorce Lawyer

If you are planning to get divorced, and you own a company with your spouse, you have several options. You can sell the business and divide the profits, have one spouse maintain ownership and buy out the other spouse, continue running the business together, or take a different approach. Divorce involving a family business or other complex assets requires help from an experienced lawyer who can protect your interests regarding marital property. If you have decided to legally end your marriage, contact a knowledgeable Oak Brook asset division attorney from the accomplished law firm of Botti Marinaccio, LTD. Call our office today at 630-575-8585 to schedule a confidential consultation to discuss your case.

Sources:
https://www.fastcompany.com/3056403/is-it-possible-to-get-divorced-and-remain-business-partners
https://www.investopedia.com/terms/m/market-approach.asp
https://www.investopedia.com/terms/a/asset-based-approach.asp
https://xplaind.com/211622/income-approach

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Botti Marinaccio, LTD.

630-575-8585

2015 Spring Road, Oak Brook, IL 60523

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