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Business Valuation and Division in Illinois Divorce

 Posted on December 00, 0000 in Division of Property

business valuation, Palatine divorce attorneyMany couples, especially those with a high-net worth, own a business that is not only their largest asset, but their sole source of income. When these couples divorce, difficult issues arise such as how to value the business, whether it should be sold or divided and, if divided, which spouse should receives the business and how should the other spouse be paid for his share.

Illinois Business Valuation

In order determine the division of assets in a divorce, the assets must first be assigned a value. However, determining the value of a business is not as easy. For an investment account, you simply look at the balance on any given day, or for a vehicle, you can look up the Kelley Blue Book value.

A business valuation involves examination of a variety of factors by an attorney and forensic accountant skilled at valuation. There are factors that must be looked at when calculating the value of a business, some of which are dependent on the type of business. In general, several factors that go into determining business value include:

  • Cash or other liquid assets;
  • Current and projected profits and losses;
  • Value of assets and liabilities;
  • Value of inventory, if the business sells goods;
  • Value of personal property, such as vehicles, furniture and computers;
  • Value of any real property the business may own; and
  • Personal, professional or business goodwill.

In addition, there are a number of methods that can be used to value a business, such as fair market value (the price a willing buyer would pay for the business) or insurance value (the amount the insurance company would reimburse the business for a loss). The method used can have a drastic impact on the ultimate valuation.

Illinois Business Division

Dividing a business can be as tricky as determining the value, but for different reasons. In all but the rarest of cases, the couple is unable to continue to work together, so the business must be either sold or awarded to one spouse, with the other spouse’s interest being bought out.

Selling the business is not always an attractive — nor feasible — option. Where the business is the couple’s primary source of income, selling it is impractical, as there would be no future income stream available to either spouse. Additionally, for some businesses, selling it is not an option because there is no willing buyer.

Thus, most couples choose to award the business to one spouse, with the other spouse’s interest being bought out. A buy-out may be structured as:

  • All-cash payment from the owner spouse to the now non-owner spouse;
  • Fixed payments for a period necessary to pay the non-owner spouse’s share;
  • Lump-sum payments in specified intervals; or
  • Distribution of other marital assets to even out the balance sheet.

There is not one “right” way to divide a business. An attorney experienced in the division of business assets can help you determine the valuation and division method that best suits your particular needs.

Palatine Divorce and Property Division Attorney

Business valuation is a complex issue that involves analyzing a number of subjective and objective factors. If you live in Palatine or the surrounding northwest Chicago suburbs and a business is part of your marital estate, contact Palatine divorce attorney Nicholas W. Richardson. Drawing on more than a decade worth of experience handling divorce and business valuation, Nicholas W. Richardson will work with you and business valuation experts to determine a fair value for your business interests and help you divide the business in a fair and equitable manner. Call The Law Office of Nicholas W. Richardson, P.C., today to schedule your free initial consultation.

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