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November 30, 2023

How Can I Protect My Small Business During a Divorce?

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How Can I Protect My Small Business During a Divorce?

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Divorce proceedings often bring many uncertainties, especially when it comes to the division of assets. If you are a small business owner going through a divorce, one of your primary concerns may be how to protect your business. After all, it is not just an asset but also a source of income, as well as an investment you’ve likely contributed to over the course of years. At Women’s Divorce & Family Law Group by Haid and Teich, LLP, we are committed to protecting your best interests. Call to discuss how our lawyers can help you pursue the outcome you need.

Understanding Marital Property and Non-Marital Property

In the state of Illinois, the law broadly defines marital property. Unless acquired by gift, inheritance, or before the marriage, assets obtained during the marriage are generally considered marital property, and this could include your business. However, there are exceptions to this rule, and it can be beneficial to understand them.

If your business was established before your marriage and has not been intermingled with marital funds or resources, it could be classified as non-marital property. This distinction can be crucial in protecting your business from being divided as a marital asset.

Valuing Your Business

Assigning a value to your business is a complex process that often requires the assistance of financial professionals, who consider various aspects of your enterprise, such as its marketable value minus the goodwill. The valuation will give you and your spouse a better understanding of the business’s worth, which is essential for equitable distribution.

Buyout and Spousal Support

Once your business has been valued, buying out your spouse’s share might be a viable option. This move allows you to retain complete ownership of your business. However, it does raise questions about spousal support or maintenance payments. You must ensure that the buyout does not lead to “double dipping,” where you end up paying your spouse from the same income stream twice.

Precautions for Business Owners

If you owned your business before your marriage, having a prenuptial agreement that designates your business as a non-marital asset can provide significant protection. If you’re already married, a post-nuptial agreement can serve the same purpose.

Running your business strictly as a business, separate from personal finances, is also an important consideration. This includes paying yourself a salary and compensating your spouse for any labor they contribute to the business. Mixing personal and business expenses can complicate matters during a divorce.

Discuss Your Divorce Case With a Knowledgeable Attorney

Protecting your small business during a divorce involves navigating complex legal and financial issues. Understanding the differences between marital and non-marital property, obtaining a fair valuation of your business, considering a buyout, and maintaining clear boundaries between personal and business finances are key strategies to consider. However, every situation is different, and having experienced legal counsel is invaluable.

At Women’s Divorce & Family Law Group by Haid and Teich, LLP, our team assists clients in complex cases and can provide advice tailored to your specific circumstances. Contact us for a consultation, and let us help you protect your business interests during this challenging time.

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