How to determine how much of a business is marital property

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How to determine how much of a business is marital property

On Behalf of | Apr 27, 2021 | Family Law

During an Illinois divorce, the judge presiding over your case will make their best efforts to equitably split your marital property. Factors ranging from the length of your marriage to the earning potential and health of each spouse can influence what the judge deems is fair and appropriate.

The bigger and more valuable your assets are, the more contentious your property division process can become. Businesses could represent tens or even hundreds of thousands of dollars worth of marital property. You will have to establish the value of your company and possibly split it with your ex.

How do you determine how much of your business is marital property and subject to division and how much of it is exempt from division? 

Look at business records and marital agreements carefully

The first step you need to take when looking at property division is reviewing any prenuptial or postnuptial agreement you signed with your spouse. Drafting such a contract is common practice for those who enter a marriage already in possession of significant assets, like a business.

If you have such an agreement, it may already outline exactly what each spouse can expect to receive or how to split the business in a divorce. If you don’t have an agreement, the next step will be to look at financial records for the household and the business.

If you started the business before marriage, a substantial amount of its total value could be your separate property. However, income earned and investments made in the business during the marriage might make some of the company’s value marital property. The same is true for financial or unpaid labor contributions made by your spouse to the company, such as working as your unofficial secretary or providing janitorial services when you need extra help.

Being proactive is often a good approach for those with much to lose

Rather than waiting for a judge to make a decision about what’s fair for you, your ex and your business, you might prefer to try to negotiate a settlement before you file for divorce. If you and your ex can reach terms that you approve regarding property division, you can retain control over the exact outcome and avoid giving all of the control over your business and financial future to a judge.

If you can’t settle things outside of court, the documentation of your financial and non-financial contributions to the company will help guide a judge as they divide your property in the divorce.


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