DIVORCE FOR BUSINESS OWNERS

Divorce is already a scary proposition for anyone. But divorce for someone who owns a business sound like a nightmare, right? It doesn’t have to be. There are things that can be done alongside an experienced attorney to keep you and your business protected in a divorce case.

What are the key factors a business owner should consider in a divorce?
In divorce, assets acquired during the marriage are generally presumed to be marital property. This includes businesses started during the marriage, outside of a few exceptions.

Another factor the court may consider is each spouse’s contribution to the business. For example, if one spouse founded and grew the business, they may argue for a larger share. Conversely, if the other spouse focused on raising children or supporting the family, they could argue for a more equitable split of the business’s value.

Can a pre-nuptial or post-nuptial agreement help?
Good news here: yes. In fact, most of the pre-nuptial agree- ments (“prenups”) we negotiate involve protecting businesses in the event of a divorce. As a refresher, a prenup is a legally bind- ing contract that spouses sign before a marriage that outlines what happens to property and debt in the event of a divorce. A post-nuptial agreement (“postnup”) is similar, except that it is signed during the marriage instead of before the marriage.

What is going to happen to my business?
There are several ways in which parties (and judges) address a marital business in a divorce action, including the following:

1. Buyout: In a divorce, marital businesses are valued by a neutral expert or opposing experts for each party. Once a value for the business is established, a buyout of one spouse’s interest in the company can take place at the time of divorce or over a period of years after the divorcee.
2. Sale: Another option for parties with a marital business is to sell the business. This option typically will not require a valuation of the business as it will be sold for fair market value, the best indicator of value. Upon the sale, the proceeds from the sale of the company can be divided as agreed by the parties or otherwise ordered by the court.
3. Maintaining Shared Ownership: In some, albeit limited, situations, spouses can continue as partners in the business post-divorce. Both parties can remain as de-facto owners of the company and one spouse’s ownership in the company might be held in a “constructive trust,” ultimately allowing both to maintain an interest in the company until a future sale or buyout.

With thoughtful legal strategies, business owners can protect their interests while achieving equitable divorce outcomes.

How is this helpful for you?
At Merel Family Law, we take pride in protecting our clients and their assets from all angles. We’ve researched the case law and we’ve done the work. When it comes to your business and assets, you’re in excellent hands. If you have questions about anything I didn’t cover here, please reach out. Call today at (312) 408-7000.

Merel Family Law has offices in Chicago, Highland Park, and Hinsdale in Illinois and in Michigan. For more information, call 312-408- 7000 or visit merelfamilylaw.com.