The Impact of Business Ownership on Marital Property Division in Illinois

 Posted on August 22, 2023 in Division of Property

When married couples in Illinois divorce, dividing up marital property can get complicated if one or both spouses own a business. Illinois has particular laws about classifying and splitting up business assets that add complexity.

Categorizing Business as Separate or Marital Property

Typically, in Illinois, any property acquired during marriage is considered "marital" and is divided in divorce. But there are exceptions - gifts or inheritances usually stay separate property, as does property exchanged for separate assets unless they have been commingled with marital assets. Prenups and postnups can also define separate properties.

If a spouse started a business before marriage and kept it financially independent, it may stay their separate property. But if marital money expanded the business, or the other spouse helped run it, the increase in value could be marital property.

Figuring Out the Value

If a business is deemed marital property by the court, it must be valued before dividing it. Business valuation involves analyzing assets, debts, profits, losses, and other financial factors. Spouses can agree on a value, use one expert, or get separate experts and give both estimates to the court.

Tax Considerations with Business Division in Divorce

Another complication is tax considerations. Generally, any property division must take federal or state taxes into account. With business division, things get more complex because the IRS and Illinois have different rules on how assets are taxed. So, spouses must consider how the division will impact their tax obligation, or they could owe more than expected.

Splitting Up the Assets

Once valued, the business assets get divided with the rest of the marital property. There are a few options:

• One spouse buys the other's share
• Sell the business and split the money
• Keep co-owning the business after divorce

The best approach depends on the business, the spouses' situations, and their ability to cooperate later.

Contact an Illinois Divorce Lawyer

Owning a business makes dividing marital property very complex in an Illinois divorce. The law on classifying business assets is nuanced. Valuing the business accurately is key. And it takes strategy to divide business assets fairly. Anyone divorcing with a shared business should talk to a St. Charles family law attorney to make sure they follow the proper steps. Call The Law Office of Matthew M. Williams, P.C. at 630-409-8184 today to learn more.

Source: https://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=2086