Any divorce can come with myriad complications that can create stress not only for those going through the legal process but also for any children and other family members involved. When there is a business involved, things can become even more stressful with many factors for the court to consider. Before discussing the business valuation in a divorce with your spouse, heading into mediation hearings, or making requests of the court, you should understand how a divorce can impact your business and how a business can impact your divorce.
Reaching a Mutual Decision
Open communication is encouraged when two parties are seeking a divorce. If you own a business, whether it is considered marital property or not, discussing the business and its assets with your ex can mean much fewer headaches in the future. Reaching an agreement concerning who owns or runs the business as well as making other vital decisions without needing the courts to decide for you will always be the best option.
Marital Property vs. Non-Marital Property
If a mediator or the family court needs to get involved in the process of separating assets, the first thing determined is whether it is marital property or non-marital property.
Marital property is generally anything purchased or otherwise acquired during the time the couple was married. If a business was started or a bank account opened before becoming married and they were always in the name of only one spouse, it is considered non-marital property and belongs to that person only. This is an oversimplified definition, however, and several factors or actions can complicate how assets are classified by the court.
Equitable Distribution of Your Business
If you established your business before you were married and you have either been the sole owner of that business or it is a partnership or corporation that your spouse is not part of, you will most likely not see a distribution of your company’s assets. However, you should consider your business an asset and you may be able to negotiate part of your business in lieu of spousal or child support.
If the business was established after you were married, it will be considered marital property and your spouse is entitled to some of its assets. Equitable distribution does not necessarily mean equal distribution, however, and there are many factors that the court will consider, including:
- The length of the marriage vs. the length of time the business has been in operation;
- The contributions that each spouse made to the marriage, financial or not;
- The ability of each spouse to provide a way of life for themselves similar to the one they had while married;
- The time and resources each spouse will dedicate to raising any children;
- The consequences that the equitable distribution of assets will have on each spouse’s federal and state taxes; and
- Other factors deemed appropriate by the family court.
This means that your business, if considered to be marital property, can be equitably distributed to be fair for both spouses involved. The value of your business can be calculated in three ways: the market value of the company, the assets owned by the company, the income earned by the company.
Other Complex Factors to Consider
Two important factors that family courts often consider when determining whether an asset is marital or non-marital property are commingling and transmutation. Commingling occurs when one spouse acquires an asset, such as a bank account or a vehicle, before getting married, but then uses these assets to help support the marriage or family. If this occurs and a spouse later files for divorce, the assets that were once non-marital and belonged solely to them may then become marital assets and subject to equitable distribution.
Hire a Kane County Divorce Lawyer
If you have a personally-owned small business, you are part-owner of a business your spouse does not own, or you own a family business shared with your spouse and you are facing a divorce, it can become quite stressful to present your assets to the court. With a Kane County divorce lawyer experienced in handling tough cases in which business assets are at stake, you can put the financial worries aside and focus on the more important things. Weiler & Lengle P.C. are those experienced lawyers ready to represent you and your business in Illinois family court.