How are Business Assets Divided in Divorce?
If you are a business owner who is going through a divorce in Illinois, you may be wondering about the division of assets. How are business assets divided in divorce? Illinois is an “equitable division” state. This means that assets are divided fairly, not necessarily 50/50, but taking into account all of the spouses facts and circumstances. Some assets are easy to divide equitably. Businesses and business assets pose more of a challenge. The skilled family law attorneys at Conniff & Keleher explore how business assets are divided during a divorce in Illinois.
Is a Business Marital Property?
When is a business considered marital property? If the business was started after the marriage took place, the business is considered marital property, unless specific steps were from the outset to separate the business legally from the marriage. Also if the business was started prior to the marriage with funds from joint accounts, it may also be considered marital property, again, unless steps were taken prior to the marriage to separate the business from the marriage.
Unless the spouses can reach an agreement as to whether or not the business is marital property, it is up to the court to decide. The court will use Illinois Marriage and Dissolution of Marriage guidelines to distribute business assets and consider the following factors:
- The financial health and income of each party
- How much each spouse contributed to the business
- Whether either spouse made contributions to the marriage as a homemaker
- How long a couple was married
- Whether or not either spouse attempted to disperse or waste any marital assets
- Whether a spouse contributed to the acquisition of the business
- Tax consequences due to the division of property
- The property value assigned to both parties
- The economic circumstances of each spouse before and after the business or property division
- Whether or not the division is part of spousal maintenance
How Do I Protect My LLC from Divorce?
A common question asked by business owners is, “How do I protect my LLC from divorce?” It is possible to protect your business with a valid prenuptial agreement or a postnuptial agreement. If you plan to do so, it is important to consult an attorney to ensure that the appropriate disclosures are made. You may also want to have a valuation of the business performed by a qualified business appraiser. Significantly understating the true value of a business could lead to the agreement becoming invalidated.
If you acquired a business using premarital, inherited, or gifted funds, it is important to have documentation showing the source and value of those funds. This will prevent a spouse from arguing that marital funds were used.
Contact Conniff & Keleher to Set Up a Consultation
If you are looking for assistance in setting up a prenuptial agreement or a postnuptial agreement, or in navigating the divorce process, we encourage you to set up a consultation with Conniff & Keleher. We’re here to guide you every step of the way and answer your questions, such as, “Does having a new partner affect a divorce settlement?” Contact us today.