Interests in a Business Under Illinois Divorce Law

 Posted on March 15, 2017 in Divorce

The parties in a divorce are free to enter an agreement regarding a distribution of property, but the court will make a determination where they cannot reach an accord. In doing so, the assets are broken into categories of marital and non-marital. Generally, only marital property is subject to equitable distribution and non-marital property is retained by the respective spouses.

One unique type of asset that may become an issue in making a property distribution pursuant to divorce is an interest in a business. When ownership is determined to be a marital asset, valuation methods and business goodwill become critical. Discuss your situation with an experienced Illinois property division attorney to ensure protection of your interest.

Valuation Methods

Establishing the worth of a company is highly complex, so a financial professional is typically hired to conduct a business valuation in divorce cases. There are three primary methodologies used:

1. Market Approach: This method looks at purchase transactions that involve similarly situated businesses to see what they might sell for on the market. This approach is akin to a Kelley Blue Book value for companies.

2. Income Approach: Cash flow is the focus in an income approach to valuing a business. A financial professional would look at the company’s income over a certain period of time to make a prediction of future performance. Present business value can be extrapolated from this figure.

3. Discounted Income Approach: This method is similar to the income approach, except that the valuator reviews cash flow in several future time periods. Then, the financial expert discounts cash flow based upon different risks that a business owner would face.

Business Goodwill

The name and brand of the business has value to its owners, and this must be considered when dividing property pursuant to a divorce. When that reputation is due to the labor investment and professional contributions of one spouse, valuation is complicated. For instance, if that spouse is the “face” of the business, taking him or her out of the picture through a property division impacts the value of the company.

Talk to a Skilled Divorce Lawyer About Protecting Your Business

Distributing interests in a business during the divorce process in Illinois is clearly quite different from giving one spouse a car. There are special valuation considerations and there is great importance attached to business goodwill. If you are going through a divorce and ownership interests in a company will be an issue, consult with an attorney who has extensive experience in property division cases. At Davi Law Group, LLC, our passionate DuPage County divorce lawyers have worked with many clients seeking to protect various types of assets, including business interests. Please contact our office with questions about your case.

Source:

http://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm