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Kathryn L. Harry & Associates, P.C.
630-472-9700

Posted on in Business Valuation

Illinois divorce attorneyWhen a couple decides to divorce, the assets and debts accumulated during their marriage will be equitably distributed, meaning that each spouse is given the fairest possible portion of those items. Sometimes this means that assets are sold off so that they can be converted into liquid funds, and nowhere does this get more complex than if a family business exists. Very often there are hard feelings, and even if there are not, it can be very time-consuming and confusing ensuring that a proper valuation is reached so the business can be sold for an appropriate amount.

Asset Distribution in Illinois

Illinois is a state that follows the equitable distribution theory of marital asset management, which means that rather than simply dividing assets down the middle, each one is valued and weighed so that each spouse can continue to live in a comfortable fashion. “Comfortable” is necessarily subjective, because each spouse will have different obligations to meet. For example, a person with an advanced degree who makes a significant amount of money may be awarded fewer marital assets because they have a greater earning potential than their spouse that lacks education.

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divorce business valuationWhen a couple divorces, their shared property, income, and assets are usually divided between them. This can include a business that the couple created during their marriage or one that one of the spouses owned prior to the marriage, but continued to build while he or she was married. In many cases, each partner may have contributed at least something to the business and in some, it could have been both partners' sole source of income.

Every business is unique and there is no uniform way to divide a jointly-owned venture between two people. This is why it is important to educate yourself about business valuation and work with an experienced divorce attorney who has handled such divisions before.

Factors to Consider During Valuation

There are four important factors that come into play in a business valuation. They are:

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There are multiple reasons that owning your own business is ideal. It allows you to be the boss and control your profits, employees and all other aspects of business. The first step in beginning a small business is a business plan. That means you have to know your product or service, your finances, and your ultimate goal. Unfortunately, if a prenuptial agreement, domestic asset protection trust or a partnership agreement isn't part of that plan, you hard work could be in danger.

The first way that a divorce can impact a business is through the division of property during divorce. Illinois is an equitable distribution and business assets are held as marital property as well. The court is allowed to split these properties as they see fit based on factors like length of marriage, contributions of the spouse to the marriage, and the age, health, and income potential of that spouse.

Without a premarital agreement there are other ways to protect your small business. The first step is acquiring an accurate description of your business and its assets. This is achieved by getting a business valuation that reviews the history of the business, current economy, financial records and other factors that give a business a value. Getting a proper valuation from a credible appraiser will ensure that the business owner doesn't pay too much for continued control of their business.

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