Building a business takes years of effort. The last thing you want to have happen is to lose the business, or a substantial portion of it, in a divorce. Three ways to protect your business in a divorce include: (1) Creating a prenuptial or postnuptial agreement, (2) Keeping clear documentation that the business was acquired with non-marital assets, and (3) Seeking early advice from a divorce attorney with substantial experience in handling divorces for business owners.
Is My Business Marital Property?
Under Illinois divorce law (750 ILCS 5/503), all marital property is subject to an equitable division between the spouses. Marital property includes all assets and debts acquired by either spouse during the time of the marriage, including income earned by the efforts of either spouse. Therefore, if you started a business during your marriage, it is most likely marital property.
However, your business will generally be considered your separate, non-marital property if:
You acquired your business prior to your marriage or using funds that you had amassed prior to marriage and kept separate from marital assets.
You inherited your business from a relative before or during your marriage or purchased your business with inherited or gifted funds.
You and your spouse made a valid prenuptial or postnuptial agreement specifying that the business is your separate, non-marital property.
Protecting a Business with a Prenuptial or Postnuptial Agreement
Illinois law (750 ILCS 10/7) holds that a prenuptial agreement is not enforceable if the agreement was not made voluntarily and the parties did not provide a reasonable disclosure of their debts and assets. If you want to create a prenuptial or postnuptial agreement to protect your business, consult an attorney to ensure that the appropriate disclosures are made. For this purpose, you may want to have a valuation of the business done by a qualified business appraiser. If you significantly understate the true value of the business, you could later be accused of fraud and the agreement could be invalidated.
Protecting a Business with Documentation
If your business was acquired using premarital, inherited, or gifted funds, be sure to keep documentation showing the source and value of those funds to prevent a divorcing spouse from arguing that you actually used marital funds to buy or build the business. Your certified professional accountant (CPA) should be able to assist you in compiling the appropriate documentation.
A Kane County Divorce Attorney Serving Business Owners
Our St. Charles divorce lawyers understand the unique needs of business owners and will provide the guidance you need to protect your business interests in all divorce proceedings. Call Weiler & Lengle P.C. at 630-382-8050.