The financial aspects of a divorce can be an intimidating experience for anyone but when your business is part of the marital estate . . . the stakes are higher. Illinois is an “equitable distribution” state, and the law requires the Court to divide the assets and debts in “just proportions”. In other words marital property will be divided fairly and equitably . . . but what is fair? In the worst-case scenario, when the parties cannot agree on how the business will be valued, the parties must arm themselves with an expert witness to value the marital business and then head to Court to persuade the Judge that their view is accurate, that their view is fair and equitable.
It is important to understand the business valuation process during your divorce to ensure your rights are protected.
What Is the Value of My Company?
A business owned by either or both spouses is considered marital property if it was bought, acquired, or founded during the marriage. It can be difficult to put a price on a company when thinking about dividing it as an asset. However, this is an important step when determining what each spouse is entitled to when the marriage ends. A forensic accountant can help place a value on a business by using several different methods. Some of these approaches include:
- Asset approach: Tangible and intangible assets are calculated, considering factors such as inventory, accounts receivable, intellectual property, and any debts or liabilities.
- Income approach: The value is based on projected future earnings or profits, and cash flow is also considered.
- Market approach: This method looks at what other similar businesses in the same region have sold for to determine the market value.
How Is a Business Divided?
First, one spouse can “buy out” the other spouse’s share of the company, similar to if one spouse keeps the house in a divorce. Second, both spouses can continue to co-own or run the company together, even after they are divorced. This usually only happens if the spouses are able to get along and are civil to each other. Another option is to sell the business to a third party and split the profits. Regardless of what route you take, it is always important to have legal guidance to make sure your rights are protected throughout the process.
Contact an Experienced Wakenight Attorney to Discuss This Further
There are many issues to resolve in a divorce, even if it is an amicable split. Dividing marital assets can be especially cumbersome, and a family-owned business can complicate matters even more. That is why you need the assistance of a knowledgeable Wakenight divorce lawyer who can explain the legal aspects of property division when it comes to your family’s company. Wakenight & Associates, P.C. have more than 50 years of combined experience in family law. Our experienced attorneys can help you. We welcome your questions and calls.
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