How Are Businesses Divided in an Illinois Divorce?

 Posted on April 11, 2022 in Divorce

When you and your spouse make the decision to get a divorce, your assets must be evaluated, in order to determine a fair split of the property you accumulated during the marriage. One of the most complex evaluations you will experience is the appraisal of any business you own together. Business valuations can quickly grow contentious and accusatory, and having the right attorney on your side may make the difference between an equitable settlement and a long period of fighting.

Potential Points of Contention

Unless there is a prenuptial agreement that addresses the distribution of the business shares, an apportionment (dividing-up of business assets) is necessary when a couple is divorcing. When a couple has worked in the same business, it can be quite difficult to tell what impact each spouse has had on the company, as opposed to as a collective. One of the most common issues that often needs to be addressed in business evaluations is the perception of each spouse and how it may radically differ. For example, one spouse may look at the business and see the worst-case scenario, while the other may see only growth.

There may also be the question of determining what part of the business may have existed before the marriage (thereby qualifying as non-marital property which is subject to division). While a business may have existed before the marriage, its growth may be classified as marital property, especially if the earnings benefited the marriage.

Standard of Review

Equitable distribution is the prevailing standard when evaluating a business for purposes of asset valuation. The distribution will likely not be equal, but it will be equitable, in that it will be fair to each party. For example, if the husband is the majority shareholder making $200,000 per year, and the wife is the minority shareholder making $20,000 per year, the court would most likely award the wife a larger share of the business as long as it is classified as marital property because to award the spouses equal shares would be significantly unfair. 

Occasionally, allegations of subjectivity may crop up over the question of fair market value. Most attorneys and appraisers use the definition propagated by the International Glossary of Business Valuation, which defines fair market value (FMV) as the price “at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller” without anything forcing their hands. The FMV may fluctuate since it is influenced by the market price for similar holdings.

Contact a DuPage County Divorce Attorney

If you and your spouse have decided to end your marriage and you have a business, you need a skilled Naperville IL property division lawyer advocating for you to ensure you receive your fair share of the marital estate. Call J. Aldrich Law, P.C. at 630-953-3000 to schedule a free consultation.

Sources:

https://www.nacva.com/glossary

https://www.investopedia.com/terms/m/marketvalue.asp