Dividing A Business In An Illinois Divorce
When a couple divorces in Illinois, one of the most complex issues that may arise is what happens to a business owned by one or both spouses. A business is often one of the most valuable marital assets, making its division a significant concern in the property settlement process. Under Illinois law, business interests may be subject to division if they are considered marital property under the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/503).
While courts strive to divide marital assets equitably, they do not always force one spouse to sell their share of a business. However, in certain situations, a court may determine that selling a business or a spouse’s share is necessary to achieve a fair distribution. Business owners facing divorce must understand their legal options and how to protect their financial interests.
Marital vs. Non-Marital Business Interests
Illinois courts first determine whether a business is marital property or separate (non-marital) property. This distinction significantly impacts whether a spouse can be forced to sell their share.
- Marital Property – If the business was started or acquired during the marriage, it is typically considered marital property and subject to division.
- Non-Marital Property – If one spouse started the business before the marriage and or used non-marital property to acquire the business during marriage, it may be classified as non-marital property and remain solely with that spouse.
In Illinois, if a business is determined to be non-marital property, it is not subject to division in the divorce. However, even a non-marital business can have marital components, such as employment income derived therefrom may be considered marital. Also, the value of one’s non-marital business may impact the allocation of the marital property, i.e., the non-business owning spouse may request a larger share of the marital pot.
Factors Courts Consider In Business Division
Illinois is an equitable distribution state, meaning that courts divide marital assets fairly, though not always equally. When deciding how to distribute business assets, courts consider:
- Each spouse’s contribution to the business (financially and operationally).
- Whether one spouse sacrificed career opportunities to support the business or the other spouse.
- The length of the marriage.
- The financial circumstances of each spouse after the divorce.
- Whether the business was a source of income for one or both spouses.
In some cases, the court may award one spouse full ownership of the business while compensating the other spouse with a buyout, additional assets, or structured payments.
When Can A Spouse Be Forced To Sell Their Share?
Although Illinois courts generally prefer not to disrupt business operations, there are scenarios where a spouse may be forced to sell their share of the business or liquidate part of its assets:
- If neither spouse can afford to buy out the other’s interest.
- If the business is deeply intertwined with marital assets, making division impractical.
- If both spouses own the business but refuse to cooperate, forcing the court to order a sale.
- If the business has debts or financial obligations requiring liquidation.
In many cases, courts will explore alternatives to selling the business, such as structured payments, asset trade-offs, or continued co-ownership under clear legal agreements.
Protecting Business Interests In A Divorce
Business owners can take steps to protect their interests before and during divorce proceedings:
- Prenuptial Or Postnuptial Agreements – These agreements can define how a business will be treated in the event of divorce.
- Buy-Sell Agreements – If the business has multiple owners, a buy-sell agreement can outline what happens if one owner goes through a divorce.
- Valuation Experts – Hiring a professional to assess the business’s worth can help ensure a fair division of assets.
Proper planning can help business owners minimize financial loss and protect their business operations throughout a divorce.
Illinois Divorce FAQs
How Do Courts Determine The Value Of A Business In A Divorce?
Absent the parties agreeing on the value of a business, Illinois courts rely on business valuation experts to assess a business’s fair market value. Valuations typically consider revenue, assets, debts, goodwill, and industry standards. Courts may also review financial records, tax returns, and profit/loss statements to ensure accuracy.
Can I Buy Out My Spouse’s Share Of The Business?
Yes. If the business is marital property, a spouse may buy out the other spouse’s interest rather than selling or dividing it. The buyout can be structured as a lump sum, installment payments, or an exchange of other marital assets.
What Happens If My Spouse And I Co-Own A Business But Cannot Agree On Its Future?
If both spouses co-own a business and cannot reach an agreement, the court may order a forced sale, dissolution, or division of business assets. Courts prefer solutions that allow a business to continue operating, but in extreme cases, liquidation may be necessary.
Can My Spouse Claim A Share Of My Business If They Never Worked In It?
Yes, if the business is classified as marital property. However, if one spouse is not an owner of the business that spouse will generally be bought out by the spouse who owns the business.
Are Professional Practices, Such As Medical Or Law Firms, Treated Differently In Divorce?
Professional practices are subject to special considerations, as they often include personal goodwill, which is tied to the individual professional rather than the business itself. While the business may be subject to division, the court will not force a professional to share their personal license or practice with a former spouse. In addition, most professional businesses cannot be owned by spouse who is not licensed as a professional.
Does My Business Need To Be Divided Equally In A Divorce?
No. Illinois follows equitable distribution, meaning the court will divide assets fairly but not necessarily equally. A spouse may receive a larger or smaller portion of the business (or its value) based on various financial and personal factors.
How Can I Prevent My Spouse From Claiming Part Of My Business In A Divorce?
The best way to protect a business is through prenuptial agreements, postnuptial agreements, or corporate agreements that define business ownership and asset protection. Keeping business and personal finances separate can also help preserve its non-marital status.
What If My Spouse Tries To Hide Business Assets During Divorce?
If a spouse attempts to hide assets, forensic accountants can investigate financial records to uncover any fraudulent activity. Courts impose severe penalties for asset concealment, including loss of the hidden assets and potential legal consequences.
Can I Continue Running My Business While Going Through A Divorce?
Yes. A divorce does not automatically impact business operations. However, if the business is a contested marital asset, financial and legal restrictions may apply until the divorce is finalized.
Contact Michael C. Craven For A Free Consultation
Dividing a business in a divorce requires a careful legal strategy. Michael C. Craven, works with business owners and professionals to protect their business interests while complying with Illinois divorce laws.
To schedule a consultation with our Chicago divorce attorney, Michael C. Craven, please call our office at (312) 621-5234. Our firm serves clients in Chicago and throughout Illinois, providing tailored legal solutions for complex asset division cases.
