If you own a business and are going through an Illinois divorce, there are several steps you should take to protect your rights. The legal and financial implications for your company can be serious. They can impact upon your agreements with business partners, shareholders, and much more. Valuing your business interest is also especially complicated, unless you have a knowledgeable attorney at your side.
At Kulerski & Cornelison, our team serves families DuPage and Cook counties. Our team are highly experienced with business ownership during a divorce and how to protect your interests. Speak to us about how we can assist you.
Understanding How Illinois Divorce Law Treats Business Assets
In every divorce, Illinois uses equitable distribution when diving up your marital property. This means the court looks at how to fairly allocate your assets. It is not always 100% equal in how it divides it if fairness dictates otherwise.
Whether your business counts as marital property will depend on several things:
- When Your Business Was Started: If your business was started before the marriage, it might be separate property. However, certain income or acquisitions acquired during the marriage could still be marital property.
- Contributions Made By Your Spouse: If your spouse helped with the business, invested, or otherwise contributed, this could be part of the division.
- Commingling of Assets: If you mixed personal and business funds, or marital and non-marital assets, the whole business could be treated as marital property.
Whether all or part of your business is separate property is complex and highly fact-dependent. Talk to a skilled Illinois divorce attorney about your unique situation.
Steps to Protect Your Business During Divorce
1. Keep Meticulous Records
Keep very detailed records. This is important business advice anyway, but it is especially important during your divorce. Understand who owns what, any capital contributions made to the business, and document all financial transactions.
2. Avoid Commingling Assets
Mixing your personal and business finances is not good even outside of divorce, but it is especially problematic when your marriage is ending. It can turn separate property into marital property and may cause other issues as well.
3. Use a Prenuptial or Postnuptial Agreement
Agreements before or after your marriage can help determine how the business is treated should you separate. They are enforceable in Illinois as long as they are drafted correctly and there is no unconscionability in how it was agreed to. Have an attorney draft your agreement, as online agreements are rarely correct or enforceable.
4. Consider a Buy-Sell Agreement
A buy-sell agreement is a legal contract. It establishes what happens if a party must transfer any of their interests due to a divorce. This protects the business itself, but also the other owners or shareholders in that business.
5. Value the Business Correctly
What the business is worth is often a very serious sticking point in divorces. You may need a professional valuation to determine what your share is worth.
6. Negotiate the Case for an Amicable Resolution
Ideally, you can reach an agreement with your spouse about how to value and separate your business. Instead of affecting the company, you could instead offset other assets in the equitable division. Many other options could be available as well.
7. Limit Spousal Involvement
Limiting what involvement your spouse has in the business can make a big difference. This can strengthen your position as to how business assets or control should be divided. However, speak with your attorney before taking any actions, as other areas of law could be implicated if you modify a spouse’s involvement in the business.
Protect Your Business During an Illinois Divorce
The best divorce attorney for your situation understands not only how to handle your divorce, but how to value and protect your business interests. Whether you have a small sole proprietorship, are the owner of a major corporation, and anything in between, your business needs protection.
At Kulerski & Cornelison, our family law attorneys are ready to help. Contact us today for a consultation of your case.