How Illinois Businesses Are Evaluated in Divorce Cases
Provided by HG.org
Illinois is an equitable distribution state, meaning that if a couple gets a divorce, their assets and debts that they accumulated during the marriage should be equitably divided between the parties. In Illinois, businesses interests can also be divided between spouses. Understanding how business interests may be divided can keep spouses informed during the divorce process.
Not all property that the couple owns is subject to division. Only the marital property is to be divided. Marital property consists of property that was acquired during the marriage. Inheritances or gifts are excluded from this definition. Property that was owned before the marriage customarily is not considered marital property.
Ways to Divide Assets
Assets can be divided between the couple in a variety of ways. For example, the spouses may decide to sell an asset such as the family home and split the proceeds of the sale between them. In other situations, one spouse may keep an asset and have its value deducted from his or her share of other marital assets. A spouse may be able to keep an income-producing asset and keep the future income stream, or the spouses may agree to split it.
Before a couple gets divorced, they should know the value of the property that they own and that is subject to division. This allows them to know the value of that property so that they know how much it should be sold for or what property will have an equivalent or similar value. Some property is not difficult to evaluate. However, businesses usually are difficult to value and may require the use of experts to get an accurate figure for their value.
There are a variety of ways that businesses can be evaluated. One popular approach is the market approach. This form of evaluation compares a business with other businesses in the same industry and locale. Another way to evaluate a business is the income-based approach. This approach examines the current and projected earnings of a business to determine its value. The asset approach looks at the assets a business owns and deducts the debts of the business from the business’ assets.
Different approaches may be used to determine the value of the business. If the spouses enter into a spousal agreement, they may determine which type of method to use to evaluate their business. If the case is contested, each spouse may choose a different evaluation method and try to convince the court of their perspective through their own testimony and possibly the use of expert witnesses. The spouses often have competing interests when determining the value of the business. For example, a spouse who plans to retain the business may wish to have the business valued at a lower amount so that he or she will still receive a share of the other marital property. A spouse who does not plan to keep an interest in the business will likely want to see a higher value of the business so that he or she will receive greater credit toward the remaining marital assets.
Expert witnesses may use a combination of the methods to determine the value of the business. Additionally, the business’ value should take into consideration the goodwill of the business, which is the value of the business’ brand, customer base, reputation, good employee relationships and intellectual property and proprietary processes.
Dividing the Business
If one spouse wants to keep the business and the other does not want to have an interest, he or she will have to forfeit a share of other marital assets in order to receive it. This may be more likely in cases involving a doctor’s office or other small private practice. An expert must often determine a value of the business before the couple can reach an equitable distribution of the business.
If the case is contested, the court may make a final decision regarding the accepted value of the business. However, the parties are often able to arrive at their own value as part of a marital settlement agreement. This agreement would still need to be approved by the court.
Contact an Illinois Family Law Lawyer for Assistance with Evaluating Business Interests
If you are going through a divorce and have a business, it is important that you contact an Illinois family law lawyer for assistance. A knowledgeable divorce lawyer can discuss legal options and different strategies that may be able to effectuate the spouse’s wishes.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.