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What Will Happen To Your Business After Divorce?

Divorce often involves a series of distractions that can sometimes seem endless, making it nearly impossible to get through the workday. If your divorce involves a business, whether or not it is jointly operated by the spouses, these distractions can become magnified. In addition to financial uncertainty, there may be operational questions; namely, questions regarding who is in charge.

The family law attorneys at Reich, Jumbeck, Stole & Reeb, LLP know what it is like to run a successful small business. They understand that you have a payroll to meet and obligations to fulfill, regardless of what may be going on in divorce court. With decades of combined experience, our professionals can help you sort through these legal, financial and emotional issues, finding cost-effective solutions for you, your family and your business.

Treat Your Business Like The Valuable Asset It Is

Most courts prefer to divide a business, rather than force the ex-spouses to remain business partners. Illinois law considers your business to be just like a house, car, retirement account, or any other asset. Obviously, a business may be much more difficult to value than some other items in the marital estate. There are generally three different approaches:

  • Market Based: This process is similar to real estate appraisal that uses comparable properties as a guide. While the method is simple, it may inflate the value for divorce purposes, because business goodwill sometimes belongs to the business owner and is thus non-marital property. For example, The Discount Dental Clinic may have goodwill based on its name, but the business goodwill of Dr. Dan’s Dental Office is tied directly to Dr. Dan.
  • Income Approach: Based on current conditions and future market forecasts, a professional appraiser estimates the business income stream and discounts that rate to account for inflation. Although the calculations themselves are quite complex, this method is preferred by many because it is relatively straightforward and easy to work with.
  • Asset-Based: While it may be ideal for a manufacturing or retail concern, this method may be inappropriate for a professional or service-based business.

Courts have a great deal of latitude when it comes to the valuation method, as long as the method considers fixed assets, non-fixed assets such as accounts receivable, business-related liabilities, and divisible goodwill.

A Divorce Does Not Spell The End For Your Business

There may not be a premarital agreement in place, especially if the spouses started the business together. In all these situations, a postmarital agreement may be an option. The courts will require all traditional elements of a contract: offer, acceptance, consideration and fairness. Some judges have looked disfavorably on buy-sell agreements and shareholder agreements; however, if the non-owner spouse is a party to the agreement, these covenants may be considered enforceable in some circumstances.

Call Us. Do Not Wait.

You have invested a lot in your business, and the diligent attorneys at Reich, Jumbeck, Stole & Reeb, LLP, can help ensure that you keep as much of it as possible, so there is something to pass on to the next generation. Contact us today at 815-770-2669 or write to us online.