How Does Divorce Impact Business Owners?

Many business owners consider their business to be like a second child. Any business is an extension of the owner; you put your blood, sweat, and tears into making it work. When a divorce occurs, there may be changes involving the structure and ownership of a business. Or there may need to be a buyout.

Business Owners in Illinois Must Divide Assets Equitably

Because Illinois is an “equitable division” state, assets must be divided equitably and fairly.

A business created after marriage may become marital property and require equitable division. If money from a joint account funded business operations, the business may be required to reimburse the marital estate. Claims may be made when a spouse contributes personal efforts to a nonmarital business if not adequately compensated.

A skilled attorney can help you navigate the challenging process of asset-splitting and protect your assets following Illinois state law.

Ownership Changes

A marital business must be divided equitably, and there are multiple ways to achieve this. The nature of the divorce will likely inform the ownership status. In a civil divorce, co-ownership is a possibility, although rarely a good idea. In an acrimonious divorce, co-ownership is even less desirable.

  • Buy out the other person – One party can buy out the other party and gain complete control of the business. A buyout can happen with liquid money, financing, or a loan. Often a financing arrangement is reached whereby a percentage of the business’ defined profits are paid each year until a set number is reached or just a flat dollar amount is paid each year at a fixed interest rate for a fixed period. If other marital assets are sufficient, they can be used to offset the value of a business
  • Co-ownership – Co-ownership allows both divorced parties to maintain ownership. This choice is only feasible when the divorcing individuals have a civil divorce and only where there is a clear-cut operating agreement and buy-sell agreement.
  • Sell the business – A final option is to sell the business and split the proceeds equitably. A business might be a reminder of the marriage, or both parties may wish to get rid of their connection. The divorced couple can place the business for sale and divvy up the profits. 

But in any of these situations, a true value must be determined by a trusted and experienced business valuator. We can refer you to the right one.

Business Structure and Employment Changes

Many businesses are family businesses, which means members of the family work and make their livelihoods through the company. 

Family members tend to choose sides in a divorce. Matters become more complicated when employment is a factor. If family members have employment at a family business, but the business owner has an acrimonious divorce, things can become tricky.

The involvement of an attorney well-versed in business and divorce will ensure the legality of employment practices and potential employment changes. 

Contact a Skilled Professional Attorney if You are a Divorcing Business Owner

Contact a divorce attorney at Family Law Solutions, P.C. who understands the court process and will work to help you obtain the best possible outcome. Your business is important to you, and the skilled attorneys at Family Law Solutions, P.C. are here to help. Contact us today for a confidential consultation. 

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