Dividing a Family Business in Your Divorce
By: M. Scott Gordon
The prospect of dividing marital assets in a divorce is stressful. Nobody wants to think about dividing up retirement assets, or determining who will be able to keep possession of certain pieces of property. To be sure, property division can be one of the most contentious aspects of a Chicago divorce, particularly when a marital asset has sentimental value that cannot accurately be expressed in a market value assessment, or when a marital asset is the source of one or both of the parties’ incomes.
Things get more tricky when a couple who owns a family business wants to divorce. Many couples in the Chicago area end up going into business together. In some cases, they may even have additional business partners in a general partnership, or they may be part of a larger business operation that operates as a limited liability company (LLC). A recent article in the Daily Herald discusses the complications of getting divorced while owning a business together. We want to say more about the process for dividing a business in a divorce.
Determine Whether the Business Can Remain in Operation
The first step for dividing a business is determining whether it can remain in operation, or whether its assets will need to be sold and distributed between the spouses. If the business can remain in operation, this typically means spouses agree to continue working together after the divorce, or one of the spouses will be able to buy out the other spouse. If the business cannot remain in operation, it will need to close and its assets will need to be sold and distributed.
Have the Business Valued By an Expert
Regardless of whether the business will remain open or not, the next step in a divorce case where a small business is part of the marital property is to have the business valued by an expert. In the best case scenario, both spouses will hire an independent expert to provide a valuation of the business and the court can take into account those valuations by two neutral parties.
Experts providing a business evaluation will look at the current economy and how the business fits into the current economy, based on the nature of the business (how much demand is there for this type of business?), the business’s financial records, the value of any stock associated with the business and “intangible” values, such as relationships built with long-term customers.
Seek Advice from a Chicago Divorce Attorney
An experienced Chicago divorce attorney can help you to think through your options when it comes to protecting your business. It may be possible to negotiate a property settlement resulting in your business remaining open, which may involve a buyout of the other spouse. Our firm regularly assists clients with complex property division case, and we can speak with you today about your situation. Contact M. Scott Gordon & Associates to learn more about the services we provide to clients in Chicago, Illinois.