Business and Divorce

There are many things to consider when you file for divorce in Illinois. Depending on your situation, you may be concerned about issues related to your child or matters related to property division. An Illinois divorce attorney can help you sort through those issues to identify your concerns and your goals, including protecting your business while going through a divorce.

BUSINESS OWNERSHIP – MARITAL OR NON-MARITAL ASSET 

Regardless of whether you are the sole owner of a business or share your interest with your spouse and /or others, having a business can complicate your divorce proceedings. 

The first issue to consider is whether the ownership interest in the business is marital or non-marital.  The issue is contentious because non-marital assets are not subject to property division in divorce.  A business ownership interest acquired prior to the marriage does not need to be divided or shared with the other spouse.  Even a business that began prior to marriage may not entirely be non-marital.  Consider, for example, a restaurant where both spouses contributed time and labor after the marriage.  Will the non-owner spouse be left without any interest in the restaurant?

Over the course of a marriage, a business changes. It does not remain the same. The business hopefully grows and expands. In many cases, a business owner must invest personal assets in the business or co-sign debts to help the business grow. If a spouse uses marital assets as collateral for business loans or uses marital assets to pay business debts, the business interest becomes commingled with personal property. By commingling the assets, a spouse turns what might have been a non-marital asset into an asset that is subject to property division rules.

If you began a business or purchased ownership in a business during your marriage, it is likely a marital asset subject to property division rules. An exception might be if you inherited the business from a relative. Inherited property is generally separate property that is not subject to property division laws, if you maintain the separate nature of the property. 

However, any gain in the value of the ownership interest of a business acquired before the marriage or inherited during the marriage could be considered a marital asset. Again, commingling the business interest with personal assets would also make the business a marital asset.

VALUING A BUSINESS INTEREST FOR PROPERTY DIVISION

If the business is marital property, the next issue becomes how to value the business. The value of the business can be a significant factor in the distribution of other property between the parties. The spouse who owns the business may attempt to undervalue the business for property division. 

In many cases, financial experts and business valuation experts examine the business carefully to calculate the current market value of the business interest. This process may require forensic accounting to ensure that a spouse has not been hiding assets or transferring assets through the business.