Keep your Business together after divorce

 Posted on December 27,2012 in Distribution of Assets

A small business is more than just an asset to the owners; it generates income, but also is a physical representation of hard work and dedication that you have put into the business.

Divorce can be a very big threat to a small business. With the right strategies and help from the right people, however, you can ensure that your business survives the divorce and remains strong long afterward.

Strategy #1: Getting an accurate and complete business estimate is essential

According to Illinois law, family businesses are assets and, therefore, subject to equitable division in the case of divorce, just like any other marital property. Equitable division means that if both parties cannot reach an agreement, property will be split based on what the court deems fair, including factors such as the length of the marriage, the age, health, and income potential of each property, and the contributions of each spouse to the marriage. Equitable marriage does not mean a 50-50 split.

One way to protect your small business is a prenuptial agreement or a business partnership/shareholder agreement that has contingent terms speaking to the divorce of the owner. Often times, however, it is too late to create this kind of agreement.

Getting an accurate and complete business valuation is one way to prevent overpaying your former spouse for his or her portion of the business. The nature and history of the business, the current economy, financial records, the surmised dollar value of intangibles like goodwill and customer relations, and the value of stock sales are all potential factors that may be considered in settling the value of your business.

If the business involves sensitive information or trade secrets, you may also want to include a confidentiality agreement between the divorce parties, legal counsel, and other experts involved in the business evaluation.

Strategy #2: Creative business buyout solutions

After the value of your business has been set at a comfortable level, there are many options to take. Ideally, there will be enough liquid assets in the business to buyout your former spouse. If that is not the case, you may be able to give up other assets that are less important to you (retirement accounts, home equity etc.) in return for agile interest in the business. A settlement that includes payments made to a former spouse over time is another solution if the business does not have enough liquidity for a complete buyout.

Continuing operation with your former spouse is always another, although it is usually not advisable.

If you are going through a divorce, this may be only one of many obstacles you and your soon-to-be ex-spouse. Contact an Illinois divorce attorney soon to discuss everything that you must split in your divorce. A. Traub & Associates Attorneys at Law can help you with all of your divorce needs.