Kane County, IL divorce lawyerMultiple types of legal and financial issues need to be addressed in a divorce. For business owners, the stakes of divorce can be high, since issues that affect their business may also affect their livelihood and financial stability. An experienced divorce attorney can help business owners determine the best steps to take to protect themselves during the asset division process. At Mirabella, Kincaid, Frederick & Mirabella, LLC., we work to ensure that our clients are able to address financial concerns correctly and complete their divorces successfully.

Is a Business a Marital Asset or a Separate Asset?

The first thing that a business owner will need to address during a divorce is how their business will be categorized. A business may fall into one of two categories:

  • Marital property: If the business was started during the marriage, it will likely be considered a marital asset. Also, if marital funds were invested into the business, or if the business grew primarily due to the joint efforts by both spouses, it may likely be considered a marital asset. This means it is subject to division between the spouses.
  • Separate property: If the business was established before the marriage, was created with non-martial assets, or inherited or gifted to a spouse, it will most likely be classified as a separate non-marital asset. In this case, it is typically not subject to division. However,  if the business was commingled with marital assets, or if the business owner’s spouse was involved in management and operations, this may need to be addressed when dividing marital property.

Proper documentation and clear financial records can help demonstrate whether a business should be considered a marital asset. Additionally a business valuation will typically need to be performed to ensure that both spouses understand the value of business assets.

Options for Dividing Marital Property While Keeping a Business Intact

If a business is deemed a marital asset, there are several strategies that a business owner may be able to use to keep it intact during and after a divorce. These include:

  • Buyout: The business owner may buy out the other spouse’s interest in the business. This involves providing the other spouse with assets of equivalent value in exchange for their share of the business. This will allow the business owner to retain full control and ownership after the divorce.
  • Structured settlement: Another approach is to establish a payment plan in which the business owner will make payments to the other spouse over time to compensate them for their share of the business. This method may allow the business owner to maintain ownership without immediate financial strain.
  • Co-ownership: In some cases, divorcing spouses may agree to continue owning a business together. While this requires a high level of cooperation and trust, it can be a viable solution if both parties are committed to the business’s success. To help prevent disputes and protect the interests of both parties, a partnership agreement should be created that will define the terms of ownership and the responsibilities of each spouse.

The Role of Prenuptial and Postnuptial Agreements

Legal agreements between spouses are some of the most powerful tools that may be used to address business ownership during a divorce. When prenuptial or postnuptial agreements are put in place well in advance of a divorce, they can clearly outline how ownership of business assets will be handled, reducing uncertainty and potential conflict.

  • Prenuptial agreement: A couple may enter into an agreement before getting married that specifies that a business owned by one spouse will be a separate non-marital asset, protecting it from being divided in a divorce. If necessary, the agreement can detail how the business will be valued and what compensation, if any, the other spouse will receive.
  • Postnuptial agreement: A couple may establish an agreement that addresses property ownership and other financial issues at any time during their marriage. A postnuptial agreement can be used to clarify ownership and division of a business that was started or acquired during the marriage. This can ensure that both spouses will understand how ownership of a business will be addressed during a divorce.

Contact Our Kane County Property Division Lawyers

Protecting your business during your divorce requires strategic planning, and you may need to negotiate agreements that protect your financial interests. The St. Charles, IL property division attorneys at Mirabella, Kincaid, Frederick & Mirabella, LLC., can help you take steps to ensure that your business remains secure. To get effective representation during your divorce, contact us to schedule an initial attorney meeting and get the legal representation you need during your divorce at 630-665-7300.