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Do You Have to Split Your Business With Your Spouse?

Several kinds of assets are easy to divide between the spouses in a divorce. However, determining out how to divide a business is complicated. Most businesses cannot simply be divided up without damaging or destroying their value. 

How Much of the Business is Marital Property?

Illinois requires judges to divide marital property equitably. Therefore, given all the factors, a judge must split all of the marital property fairly. There are two questions that must be answered about every asset before the marital property can be divided:

  1. Is the asset marital property?
  2. What is the value of the asset?

An asset is considered marital property if it was acquired after the marriage, with a few exceptions. In the case of a business, if the business was started after the marriage, the entire value of the business is marital property. However, if the business was started by one of the spouses prior to the marriage, then only part of the value of the business will usually be considered marital property.

Getting an Accurate Valuation

The parties cannot simply estimate the value of the business. It is important that you obtain an accurate business valuation. This valuation may need to include the value of the business today, the value of the business prior to the marriage, and how much of the current value of the business was accrued during the marriage.

Possible Ways to Deal With the Business

There are several options for dealing with a business in a divorce. Often it is better for both sides, and the business itself, if the spouses can come to an agreement instead of having a judge impose a solution.

Options for dealing with business include the following:

  • Selling the business outright and dividing the proceeds;
  • One spouse takes full ownership and control of the business. He or she would pay his or her spouse the value of their share in the business from other marital assets. Sometimes the family home is "traded" for the business;
  • Both spouses continue to own and operate the business together. The spouses may or may not have the same ownership stakes as each other. This only works if the spouses are capable of continuing to work together; and
  • One spouse exercises full control over the business; however, the other spouse is awarded non-voting shares in the business. These shares can later be sold or bought back by the business at fair market value.

If you are considering divorce and have questions about business valuation, or any other divorce issue, please contact a skilled DuPage County divorce attorney to discuss your options. Find out how to best protect your assets. Call The Stogsdill Law Firm, P.C. today at 630-462-9500 to schedule your consultation.

Source:

http://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm

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