Many marriage dissolution matters in Chicago involve a small business. There are about 30 million such entities in the United States, according to the Small Business Administration. That figure represents 99.9% of the businesses in America.
A successful business may have a significant value. In many cases, it is the largest asset in the legal proceeding and also the couple’s primary source of income. Small businesses often have a significant emotional value as well. Sometimes, that emotional value eclipses the financial value.
Given all these issues, business division in a divorce is often the most complicated element of a property division. Every case is different, but most Illinois judges use a process like the one that is outlined below.
What Options do Litigants Have in Chicago?
It is extremely rare for judges to unilaterally order a sale and division of proceeds. Instead, the parties themselves usually have the first input into this matter. In many cases, their input could also be the last word.
Smart business-owners often have premarital agreements that cover these situations. Illinois is a Uniform Premarital and Marital Agreements state. So, as long as the agreement was not unconscionably one-sided and both husband and wife had separate counsel, Chicago judges usually honor every aspect of these agreements. If there is a valid premarital pact, that often ends the inquiry.
It is also quite common for only one spouse to express interest in running the business. That is especially common if the business is doing poorly or if the couple did not start the business together. The non-owner spouse usually receives a buyout. Or, the non-owner spouse might receive a disproportionate share of the other marital property.
Finally, some soon-to-be-ex spouses want to continue working together. Some couples are better business partners than they were romantic partners. In an extremely small business, like a corner sandwich shop, this arrangement is difficult. If the business is a little larger, such as a few franchise restaurant locations, joint operation is a very legitimate option.
The Valuing Process in Chicago
If the divorce includes a business liquidation, the business must be valued properly. Usually, that process involves one of three methods:
- Income Approach: This model looks at the business’ current and projected future revenue and assigns a value on that basis. This method is very easy to use, but it is somewhat limiting in terms of the factors it considers.
- Asset Approach: Similarly, examining capital assets is a straightforward method that is also rather limiting. It may also be misleading or even impossible to use in many service-oriented businesses, like a traveling masseuse.
- Market Approach: Usually partnering with outside financial professionals, an attorney can determine a business’s market value using comparable nearby businesses. This method is usually the most time-consuming and expensive approach. However, it is also by far the most accurate method.
It is important to remember that the entire business may not be marital property in an Illinois family court. Business goodwill is an excellent example. If the goodwill is related to a spouse’s name (Frieda’s Beauty Shop), the goodwill is usually non marital property. If the goodwill is tied to another name (McDonald’s), it is usually marital property.
Contact Experienced Lawyers
Business division is often the most complex property issue in a divorce proceeding. For a confidential consultation with an experienced family law attorney in Schaumburg, contact Glasgow & Olsson.
(image courtesy of Oli Dale)