Getting a divorce can be challenging for anyone, but business owners will face some unique concerns. In addition to considering their own financial needs, they may need to take steps to protect the future of their companies. Understanding how to safeguard a business during a divorce is crucial. An attorney who is experienced in both family law and business matters can provide essential guidance and support throughout the divorce process.
Understanding the Implications of Divorce on Your Business
As a business owner, your company is not just a source of income. When you have built a successful business, it can be a part of your identity, and it can serve as a testament to your hard work and dedication. However, during your divorce, your business will be viewed as one of the assets you and your spouse own, and ownership of your business may need to be addressed during the property division process.
Marital vs. Non-Marital Property
When addressing issues related to your business, you will first need to determine how it will be classified. It may be included in one of two categories:
- Marital property: In Illinois, which is an equitable distribution state, assets acquired during your marriage are considered marital property, and they are subject to division in a divorce. If your business was started or grew significantly in value during your marriage, it will likely be considered marital property.
- Non-Marital property: Assets you acquired before your marriage or through inheritance or gift are typically considered non-marital property, and they are not subject to division. If you owned your business before getting married, you will likely be able to maintain sole ownership after your divorce. However, the distinction between marital property and non-marital property can become blurred if marital assets were invested in the business. In these cases, some of your business assets may be considered marital property, or you may be required to reimburse your spouse for any contributions that led to an increase in the value of your business.
Valuing Your Business
An accurate business valuation is crucial during your divorce. The process of determining the value of business assets can be complex, and you may need to work with financial experts to determine the fair market value. Methods such as calculating the value of business assets and liabilities, reviewing earnings and examining growth potential, or comparing the business to other companies that have recently been sold may be used to determine the current and future value of your business and ensure that it can be addressed correctly during the property division process.
Strategies to Protect Your Business
There are several steps you can take to make sure you will be able to maintain ownership of your business, protect against losses, and provide for your financial needs in the future:
- Prenuptial or postnuptial agreement: One of the most straightforward ways to protect your business is through a legal agreement with your spouse. A prenuptial agreement made before getting married or a postnuptial agreement made during your marriage can specify how ownership of your business will be handled in the event of a divorce. This can help ensure that your business will remain your separate non-marital property.
- Keep business and personal finances separate: Mixing your personal finances with your business can lead to complications during your divorce. Maintaining separate accounts and keeping clear records can help establish your business as a distinct entity that is separate from marital assets.
- Pay yourself a competitive salary: If you do not pay yourself a market-rate salary, your spouse may claim they are entitled to a larger share of the business profits. By receiving fair wages through your business, you can ensure that you will have the financial resources you need, and you can make sure issues related to child support or spousal support will be addressed correctly.
Contact Our DuPage County, IL Business Owner Divorce Attorneys
When approaching divorce as a business owner, it is essential to take proactive steps to protect your assets. At Mirabella, Kincaid, Frederick & Mirabella, LLC., our Wheaton, IL business asset division lawyers understand the complexities of business valuation and other issues that may arise during divorce proceedings. Our team is here to offer the guidance and support you need to navigate the legal process and protect your financial interests. To schedule an initial attorney meeting, contact us today at 630-665-7300.
