When both spouses own the business together, divorce becomes more complicated than it already is. In addition to settling their differences, dealing with custody issues (if applicable), and dividing their non-business assets, they must know how to maintain a professional relationship until they can figure out the best way to proceed. Typically, couples that are also business partners opt to close their business, sell the assets, and split the profits. Others, however, allow one spouse to buy the other out. Very rarely does a divorcing couple choose to remain in business together.
It becomes more complicated, however, when other co-owners or partners are involved. When other people have ownership of the business, their needs must be taken into consideration as well—especially if the other owners are family members or investors.
To prevent complications, it is always suggested that any couple that goes into business together should have a written agreement that details precisely how the business should be run in the event of a divorce or how to dissolve the business if necessary.
It is much more common for the business in question to be owned by one spouse and not both. However, that doesn’t make matters any less complicated. In this scenario, the question turns from “What do business ethics dictate?” to “What constitutes marital property?” For instance, if one spouse spent the majority of the marriage building a multi-million dollar empire, should the other spouse be entitled to a percentage of the shares? And if so, how much?
Illinois is an equitable distribution state, meaning that marital property does not necessarily have to be divided equally, it just needs to be divided fairly. In the case of the business, the judge will consider how much of a role, if any, the non-owner played in making business ownership a possibility. For instance, if the non-owner helped run the books and took care of the children while the business owner put in late nights, weekends, and early mornings and contributed part of his or her income to get the business off the ground, the judge might award ample share of the business to them. On the other hand, if the non-owner had no role in the business’s success whatsoever, the judge might see no reason to grant them any share.
With that in mind, the judge is not likely to grant the other spouse partial ownership; rather, they will have the business valued and order the spouse-owner to pay the other spouse his or her due share.
It is also important to keep in mind that just because the spouse-owner had ownership of the business prior to getting married does not mean that the business is not marital property. Marital property is considered any income source that contributes to the family’s expenses, which a business is.
If you want to file for divorce or already have, and if you are unsure of what is to become of the family business, reach out to the Chicago divorce lawyers at Arami Law for advice and aggressive legal representation. We will help you achieve an equitable resolution that is in the best interests of you and your loved ones. To speak with a knowledgeable and experienced attorney, contact us today online or by phone at 312-212-1399 to set up a consultation.
We can meet with you at our office or discuss your case over the phone. Our firm prides itself on accessibility and making certain to help each and every client in a timely manner.
For business owners going through a Chicago divorce, the central question is: is my business marital property? The answer depends on several factors — when the business was founded, how it was funded, whether marital funds or labor contributed to its growth, and whether a prenuptial or postnuptial agreement addresses it.
A business started before the marriage with separate property funds may be entirely non-marital. However, active appreciation — growth driven by either spouse’s efforts during the marriage — is typically considered marital property even if the business itself is not. A business started during the marriage with marital funds is almost certainly marital property subject to division.
Strategies Arami Law uses to protect business owner clients include:
When a business is subject to division, its value must be determined — and this is almost always disputed. A spouse seeking a larger settlement has every incentive to argue for a high valuation. The business owner has every incentive to minimize it. Expert witnesses on both sides will present competing valuations, and the court will make a determination.
Key battlegrounds in business valuation for divorce include:
Arami Law retains qualified forensic accountants and business valuation experts experienced in Cook County divorce proceedings to ensure our business-owner clients receive the most favorable defensible valuation possible.
If you are a business owner contemplating divorce — or concerned that divorce may be in your future — there are steps you can take to protect your business interests before proceedings begin. Arami Law can advise on:
If you are a business owner facing divorce in Chicago or Cook County, contact Arami Law for a confidential consultation. We understand the unique pressures on business owners and provide sophisticated legal counsel designed to protect your livelihood while achieving a fair resolution.
