Keep Your Illinois Business In One Piece After Divorce
If you operate a small business, it is probably more than just an asset to you. A small business generates income, but it is also a physical representation of all the hard work and vision you’ve expended to build something out of nothing.
Understandably, it can be a real concern when a major life event like divorce threatens your business. But, with the right strategies and help from a business valuation and division divorce attorney, you can ensure your business weathers the storm of divorce and remains viable long into the future.
Accurate And Complete Business Valuation Essential
In Illinois, closely-held or “family” businesses are assets subject to equitable division upon divorce, just like any other marital property. Equitable division means that if the parties are not able to come to their own agreement, property will be split up based on what a court determines to be fair, considering factors like the length of the marriage, the age, health and income potential of each party, and the contributions of each spouse to the marriage. Equitable division does not necessarily mean a 50-50 split.
So how can you safeguard your business when it comes time for property division? Of course, it helps to have protective documents in place as divorce approaches, for instance, a prenuptial agreement or a business partnership/shareholder agreement that has contingent terms speaking to the divorce of an owner. For many business owners, however, it is too late for these kinds of documents once divorce has entered the picture.
Fortunately, there are other ways to help your business stay intact. Getting an accurate and complete business valuation is one way to keep from overpaying your former spouse for his or her portion of the business. The nature and history of the business, the current economy, financial records, the surmised dollar value of intangibles like goodwill and customer relations, and the value of stock sales (if any have taken place) are all examples of factors that may be considered in setting the value of your business. Because expert opinions on the “paper value” of your business can vary, it is important to use a credible appraiser and build strong arguments that support your views.
If your business involves sensitive information or trade secrets, you may want to execute a confidentiality agreement between the parties, legal counsel and any experts involved in the business evaluation.
Creative Business Buyout Solutions
Once the value of your business has been set at a level you are comfortable with, you have several options. Ideally, you’d have enough liquid assets in your business to buy out your former spouse. If that is not the case, however, you may be able to give up other assets that are less important to you (retirement accounts, home equity, etc.) in return for an unencumbered interest in the business. Structuring a settlement where payments will be made to a former spouse over time is another solution if the business does not have enough liquidity for an outright buyout.
Continuing operations with a former spouse still involved in the business is another option. Although remaining business partners work for some former spouses, it is a risky prospect for most business owners and is generally not advisable.
Ultimately, you always have the option to sell the business and simply divide the proceeds. But, with the right strategies, effective negotiation tactics and a strong advocate by your side, you will have many tools at your disposal that can prevent this outcome.
Talk to an experienced Chicago divorce and family law attorney today to learn more about protecting your business in divorce.