Dissecting owning a Business in a Chicago Divorce Case

Divorce is rarely a simple process, and when one or both spouses own a business, the stakes can become significantly higher. In Chicago, as in the rest of Illinois, divorces involving business ownership present unique challenges, especially when it comes to property division, valuation, and financial settlements. Understanding how the courts approach these cases can help business owners and their spouses navigate the process with greater clarity.

Illinois is an “equitable distribution” state, which means marital property is divided fairly—though not necessarily equally—in a divorce. Marital property includes most assets and debts acquired during the marriage, while non-marital property (such as assets owned prior to the marriage or received as gifts or inheritances) typically remains with the original owner.

When it comes to business ownership, whether the business is considered marital or non-marital property is a key question.

If the business was started or acquired during the marriage, it is likely to be classified as marital property. However, even businesses that pre-date the marriage can be subject to division if marital funds or efforts significantly contributed to their growth or operations.

Before a business can be divided, its value must be determined.

This process can be complex, requiring the expertise of financial professionals such as forensic accountants or business valuation experts. These professionals assess factors like:

• Revenue and profitability
• Assets and liabilities
• Market conditions
• Future earning potential

In some cases, disputes may arise over the valuation methodology, as different approaches (such as income-based, asset-based, or market-based valuations) can yield significantly different results. It’s crucial to work with a qualified professional to ensure an accurate and defensible valuation.

Once the business’s value is established, the next step is determining how to address it in the divorce settlement.

There are several common approaches:

1. Buyout: One spouse may buy out the other’s share of the business. This is often the preferred option for parties who want to avoid ongoing entanglement.
2. Co-ownership: In some cases, divorcing spouses may agree to continue co-owning the business. While this arrangement can work for amicable ex-spouses with a strong professional relationship, it’s generally less common due to the potential for conflict.
3. Selling the Business: The spouses may decide to sell the business and divide the proceeds. This option can be more practical for businesses that require both parties’ involvement or when neither spouse wants to retain sole ownership.
4. Offsetting Assets: The spouse retaining the business may compensate the other by giving up other marital assets of equivalent value, such as real estate, investments, or retirement accounts.

If you own a business and are concerned about protecting it in the event of a divorce, there are steps you can take:

• Prenuptial or Postnuptial Agreements: These agreements can specify how the business will be treated in a divorce, potentially avoiding lengthy disputes.
• Keep Finances Separate: Avoid commingling marital and business funds, as this can blur the line between marital and non-marital property.
• Maintain Accurate Records: Detailed financial records can help establish the business’s value and ownership history, which is critical for determining its status in a divorce.

Navigating a divorce involving business ownership is a complex process requiring skilled legal guidance. Both spouses should work with experienced divorce attorneys, such as those at Ward Family Law, LLC, who understand Illinois’s family and business laws. These professionals can help negotiate fair settlements, protect their clients’ interests, and minimize the emotional and financial toll of the process.

Owning a business adds an extra layer of complexity to a Chicago divorce case: from determining whether the business is marital property to valuing and dividing it, each step requires careful attention to detail. By understanding the legal landscape and seeking expert advice, both business owners and their spouses can work toward resolutions that protect their financial futures. If you’re facing a divorce and own a business, don’t hesitate to consult with a qualified attorney to ensure your interests are fully represented.  Jennifer R. Ward can be reached directly via email for scheduling your initial consultation at jward@wardfamilylawchicago.com