Yorkville Divorce Lawyers for Business Owners

Attorneys Assisting With Business Valuations and the Division of Business Assets in Yorkville, Illinois

For many entrepreneurs, the businesses they own and operate are much more than a source of income. A business may represent years of hard work, personal sacrifices, and financial risks. When a business owner gets a divorce, issues related to their business may be some of the most important concerns that they will need to address. A person may worry about whether they will be able to continue owning their business, whether their spouse will receive a share of the company, whether the business's operations will be affected, and what they can do to protect the investments they have made.

At Gateville Law Firm, we can help our clients understand how to address concerns related to a business during a divorce. Our lawyers understand the financial records, ownership structures, and legal issues that may play a role in decisions about a business, and we can provide guidance on the steps that clients can take to protect their interests and maintain financial security going forward.

Addressing Business Ownership in a Divorce

When a company was founded during a couple's marriage or acquired using marital funds, it will usually be considered marital property. This means it will be treated as if it is co-owned by both spouses, even if only one spouse's name is on the ownership documents and the other spouse has not been involved in business operations.

If a person owned their business before they got married, the business will most likely be considered non-marital property. The business owner will typically be able to maintain ownership of the business. However, if a couple invested marital funds in a non-marital business, or if the other spouse made contributions to the business during the marriage that led to an increase in value, the owner may be required to reimburse the other spouse for marital contributions to the business.

Why a Business Valuation Is Essential During a Divorce

Property cannot be divided fairly between divorcing spouses until the value of all assets is known. An accurate valuation can ensure that both spouses fully understand what a business is worth. This can help ensure that both spouses will be able to receive a fair and equitable share of their marital assets.

Methods Used to Value a Business

Our attorneys have the experience needed to handle issues related to businesses. We can work with financial professionals to determine the correct value of a business. The approaches that may be used during the business valuation process may include:

• Income Approach: This method may estimate a business's value based on its cash flow, expected future earnings, and the likelihood of future growth.
• Market Approach: This method will compare a business to similar companies that have recently been sold, which can provide an estimate of the possible purchase price.
• Asset Approach: This method will add up the value of equipment, real estate, inventory, receivables, intellectual property, or other assets owned by a business. Debts or other liabilities will be subtracted to determine the value of what a business currently owns.

Goodwill may also play a role in determining a business's value. This may include enterprise goodwill related to a business's name, location, and client base. Personal goodwill involving the owner's own reputation, skills, and relationships may also affect the value of a business. For example, the value of a dental practice may be affected by a dentist's relationships with their patients.

Buying Out a Spouse's Share of a Business

A business owner who wishes to maintain ownership and control of their company may have several ways to compensate their spouse for their share of the business, including:

• Offsetting With Other Assets: The non-owner spouse may receive assets such as a couple's family home, retirement savings, or funds in financial accounts.
• Structured Payments: The owner may pay off their ex-spouse over time.
• Outside Financing: A bank loan or refinancing can provide the ability to pay the other spouse a lump sum for their share of a business.

Selling a Business During a Divorce

In some cases, selling a business may be the right choice for spouses. If the owner cannot afford a buyout, or if it will not be feasible to continue owning and operating a business, the best option may be to sell the business. This will convert the business into cash that can be divided between spouses. However, finding a buyer can take time, and a couple will need to understand what taxes may apply. A divorce agreement may address how a business will be managed until the sale closes and how profits will be handled.

Co-Ownership of a Business by Ex-Spouses

In cases where a buyout or sale may not be possible or where both spouses have been involved in operating a business, a couple may decide to maintain co-ownership of a business after they divorce. This arrangement may help to preserve a business's value and ensure that it can continue operating successfully.

Ex-spouses who co-own a business will need to be able to work together, and they will need to understand how issues such as management duties, profit distributions, and decision-making will be handled. A partnership agreement can be crucial to ensure that the rights of both parties will be protected. Without an agreement in place, disputes that may arise after a divorce could threaten the success of a business.

How Business Income Can Affect Financial Support

When one spouse will pay ongoing spousal support or child support to the other spouse, the amounts paid may be affected by the income they earn through their business. The gross receipts earned by a business may be calculated, and net income may be determined by subtracting ordinary business expenses. Our lawyers can help ensure that business income will be calculated correctly when establishing support orders, and we can also assist with post-divorce modifications to address changes in income or other financial issues.

Updating a Business Succession Plan After a Divorce

When a business owner gets a divorce, the business succession plan that they had put in place may become outdated. A buy-sell agreement that provided a spouse with ownership rights may need to be updated. Accounts or life insurance policies that listed a person's former spouse as a beneficiary may need to be changed to ensure that the correct beneficiary designations are in place. Operating agreements, partnership agreements, or other agreements that had been created may need to be changed to address who can hold an ownership interest in a business.

Our attorneys can help business owners review the agreements that have been put in place and make sure their succession plans reflect their current situations. We can help a person name a new successor, update powers of attorney that may have authorized an ex-spouse to handle business affairs, or determine whether business assets may be held in a trust that will allow the company to pass smoothly to children or other chosen successors.

Frequently Asked Questions About Business Ownership During Divorce

Contact Our Yorkville, IL Business Owner Divorce Attorneys

At Gateville Law Firm, we can help clients perform business valuations during divorce, negotiate buyout terms, and handle concerns related to succession planning. We will work to protect our clients' interests throughout the divorce process and beyond. Contact our Yorkville, Illinois business owner divorce lawyers at 630-780-1034 to arrange a consultation.