When you decide to get a divorce despite all the emotional stress involved, it becomes even more complex when a business partnership is involved. In Illinois, the disentanglement of a business from a failed marriage can result in a slew of legal and financial hurdles that can take a toll on you without the best lawyers. Continue reading as we discuss how divorce impacts entrepreneurial ventures in Illinois.
Marital Property and Business Assets
Marital property is the foundation of understanding divorce’s impact on a jointly owned business. In Illinois, marital property encompasses any assets acquired during the marriage, which includes a company. In the case of a divorce, any business founded during the marriage must be divided, which can complicate the process.
Valuation of the Business
During a divorce, determining the value of any businesses involved is one of the most important things to consider when dividing marital assets. In Illinois, it is essential to note that marital property is divided under the principle of equitable distribution, meaning it may only sometimes be divided equally.
The court will carefully evaluate the value of the business and allocate a fair portion to each spouse based on several variables, including the company’s financial state, potential future success, and each spouse’s contributions to the business. This process ensures that both parties are treated fairly and receive their rightful share of the company.
Buyout or Co-Ownership
When a joint business is at risk, divorcing spouses have two primary options: buyout or co-ownership. A buyout occurs when one spouse purchases the other’s company share, enabling them to retain sole ownership.
Both parties can establish co-ownership to remain involved in the business. However, agreeing on roles, responsibilities, and decision-making is vital.
Mediation as a Viable Option
Mediation provides another dispute resolution process that enables you to work collaboratively with a neutral third party; usually their lawyers, to reach mutually agreeable solutions.
By opting for mediation, you can maintain more control over the outcome and potentially preserve the harmony of your business. That’s where we come in at FKMA law to ensure the entire process is smooth, whether mediation or division of the company and assets.
The splitting of a business during a divorce can have significant tax implications. It is advisable to work with tax professionals to understand the potential tax consequences of various scenarios, such as transferring ownership, buying out a spouse, or establishing a new business structure. Proper tax planning can help optimize your financial situation while minimizing tax liabilities.
Protective Measures for the Business
If you own a business, you must lay down preventive measures to protect yourself from potential troubles caused by divorce. A clearly defined prenuptial or postnuptial agreement is crucial to determine the division of business assets in the event of a divorce.
Additionally, having an explicit shareholder agreement or operating agreement that addresses the implications of divorce can help minimize conflicts and ensure the seamless continuation of operations.
In conclusion, marriage dissolution that involves a jointly owned business can be complex. While the end of a marriage is undoubtedly tricky, a thoughtful and strategic approach can help protect the interests of all parties involved.
That’s why you should leave it to our team of experienced lawyers in divorce proceedings to handle the entire process. Reach out to us today, and we will be happy to help.
Contact Franks, Kelly, Matuszewich, and Andrle Attorneys at Law for help with your case today.