Under Illinois law, all marital property is subject to an equitable division between spouses. That includes all assets and debts acquired during the marriages, including income earned by efforts of either spouse. Meaning if you started a business during the marriage, it’s likely marital property.
The last thing you want to happen during a divorce is lose half of the business you’ve worked so hard to build. It’s important to put a protection plan in place that may help prevent a contentious situation between you and your spouse.
In Illinois, there are three main ways to protect your business during a divorce.
Prenuptial or Postnuptial Agreement
A formal agreement can help facilitate a resolution and ease anxiety for both parties at a time when emotions are likely running high. It’s best to consult an attorney to ensure appropriate disclosures are made because in Illinois, prenuptial or postnuptial agreements are not enforceable if either party did not provide a reasonable disclosure of their debts and assets.
If it’s found that you significantly undervalued the business, you could be accused of fraud and the agreement will be invalidated. For that reason, it’s also a good idea to get the business valued by a qualified business appraiser.
Even without a pre or postnuptial agreement, there are several steps to protect your business during a divorce.
- First, you can establish yourself as the sole owner of your business by making sure the organizing documents for the firm clearly specify that the business cannot be transferred in the event of a divorce. In this case a cash award may be made to the non titled spouse.
- Second, keep your business and personal expenses clearly separated. Untangling commingled funds adds unnecessary complexity for advisors and could be detrimental to the settlement.
It’s important to keep clear records of both capital sources for the business, as well all cash transactions.
- Lastly, if your spouse works at your business, even in a minor capacity, it’s essential they were paid market rates for their services. Otherwise, they may seek a higher percentage of the company’s value.
Seek Advice from an Experienced Divorce Attorney
One of the best things you can do is contact a divorce attorney early in the predicament who is experienced in handling divorces for business owners.
At Masters Law Group, we understand how stressful a divorce can be. That’s why we move through settlement negotiations, meditations or litigations with our clients assurance and well being at top of mind. We’re skilled at identifying and valuing assets and wealth, including real estate, securities, business interests, retirement funds, pension plans, tax shelters, overseas accounts, stock options, trust and other actual or potential sources of wealth.
If you are looking to explore your options on divorce or legal separation with professional and experienced advisors, contact Masters Law Group to schedule an appointment here.