When business owners get divorced, their spouses often have a valid claim to a portion of the business's value as a part of their divorce settlement. If an owner doesn't approach the divorce process with clear priorities and careful planning, they may lose their business entirely, which is rarely a good outcome.
It comes as a surprise to many people that business's qualify as personal property, just like a vehicle or a family home, although businesses are much more complex and difficult to value. If you are a business owner with divorce in your future, now is the time to begin building a divorce strategy to help ensure that you protect your priorities and land on your feet once the dust settles.
Understanding the risks to your business
Businesses come in many different configurations, and not all businesses are worth saving in a divorce settlement. For instance, if your business is a small operation that does not generate much income and does not employ many people, then you may choose to let it go as a casualty of the divorce process.
However, in most cases, a business impacts many people outside of the business owner's home, such as employees and clients, and may also provide a strong source of income once the divorce finalizes. If you believe that your business is a key part of rebuilding your assets in the next season of life, it is wise to build your divorce strategy with this in mind. If you do not protect your business, it may end up on the chopping block during property division.
Do you have protections established?
Many business owners take the precaution of protecting their property with a prenuptial agreement before they marry, while others do not create these protections or acquire the business after they are already married. If you do not have a prenuptial agreement protecting your property, you must have a plan to keep it secure.
In some instances, courts allow owners to classify a business as separate property, if their spouse is not involved in the operation of the business and if the owner keeps their personal and business finances separate. The more that personal and business finances commingle, the stronger a spouse's claim to an owner's business.
Sacrificing other assets
You may find that there is no way to avoid including your business in property division, in which case it is important to understand its complete value. A professional business valuation outlines a business's worth from many perspectives, giving you a full picture of its strengths and weaknesses and ensuring that you do not over-pay when negotiating a fair settlement.
Even if you must include your business as part of your marital property, you may still find ways keep it intact, such as compensating your spouse with other assets or establishing a structured payment plan to compensate them over time if other assets are not available.
Divorce is complicated, but it doesn't have to be professionally devastating. The sooner that you build a strong, well planned divorce strategy, the sooner that you can refocus your attention on your personal needs, resting assured that your rights in Illinois remain protected.