What Happens to the Family Business in an Illinois Divorce?
According to national statistics, approximately 90 percent of businesses in the United States are family-owned. These businesses are often the heart of communities, providing jobs and revenue sources, as well as services and products. Unfortunately, with the divorce rate as high as it is, when a couple who own a business decide to end their marriage, the impact their divorce can have on the business can be a significant one. This is why it is critical to have a skilled divorce attorney representing you if a family business is part of your martial estate.
Asset Division in a Divorce
Under Illinois divorce law, when a couple divorces, their martial estate is divided in an “equitable” manner. This is different from community property states that divide a couple’s assets 50/50. With equitable division, each spouse will receive an equitable share of their estate, although the dollar amount will not necessarily be exactly the same.
When a couple owns a business, that business is often the largest asset they own, however, those assets are usually not liquid assets, which can make it more difficult to divide the business. Instead, the assets may in the form of equipment, inventory, accounts receivables, and more.
The result is that either the couple must sell the business and share the proceeds or one spouse must “buy” the other spouse’s share of the business. If this is what is decided, the first step is to determine the value of the business.
In order to “buy” the spouse’s share of the business, the couple may use the buying spouse’s share of the couple’s real estate, retirement accounts, and other financial accounts towards the price.
If the buying spouse’s share of those assets does not cover the price, then they may be able to use a property settlement note for the purchase if both parties are in agreement.
A property settlement note is a deferred payment of property value. These are commonly used in divorce when one spouse will be awarded sole ownership of the family home. The property settlement note allows the spouse some time to remortgage or pursue other options in order to pay the other spouse their share of the equity in the home. However, property settlement notes are also used for family business buyouts in a divorce.
Contact a Kane County Divorce Lawyer
If you own a family business and are contemplating divorce, make sure you have a skilled St. Charles, IL divorce attorney representing you. Call Shaw Sanders, P.C. at 630-584-5550 to schedule a free and confidential consultation.