DuPage County Divorce and Family Business Matters  

 Posted on June 17, 2022 in Divorce

Divorce is a life-changing ordeal, but it can be even more emotionally harrowing when it involves a family business. Sometimes the family business is inherited and dates back many years, intensifying the emotional value of the company. Or a family business could be equally, or partially, established by divorcing spouses. For some, family businesses are the sole source of family income. Business goodwill and business valuation need to be determined to decide how to proceed with allocating the property of a family business. 

A divorce attorney proficient in business law can appraise a family business and propose solutions. Whether to dissolve the family business, remain business partners, or sell to a third party, divorcing spouses should know their options and rights.  

Determining the Property of the Family Business 

A family business can be defined as either non-marital or marital property.  Even if a business was originally non-marital, the family business could become marital property through the commingling of assets.

 Marital agreements that denote ownership of the family business help strengthen a divorcing spouse’s wishes.  A postnuptial or prenuptial agreement can alleviate confusion and lengthy and costly divorce proceedings.  A family law attorney can help with estate planning and complex property division.

What are Business Goodwill and Business Valuation?

Business goodwill is the business’s reputation and must be defined to determine the value of the business. The two types of business goodwill include the following.

• Enterprise goodwill – The reputation and name of a family franchise business is considered enterprise goodwill. These businesses include chains like hardware stores, gyms, and fast-food restaurants. 

• Personal goodwill – Personal goodwill results from the owner’s reputation.  

Business valuation is the process of determining a business’s value. The most common business valuation approaches include:

• Asset approach – This approach only calculates the business’s net asset value (NAV) and subtracts any liabilities.

•  Income Approach – Also known as “income capitalization approach,” this approach calculates the business’s grossed income.

•  Market approach – This approach analyzes recent sales of similar businesses but also factors in various adjustments, such as the size, age, and location of the family business.

Contact a DuPage County Business Law and Divorce Attorney

Pesce Law Group P.C., a full-service family law firm, handles divorcing clients with jointly-owned businesses. We are committed to finding optimal solutions and strive to assuage any acrimony involved with the ownership of family businesses. Our dependable lawyers and team of professionals are sympathetic to the needs and wishes of our clients. Contact a Burr Ridge business law and divorce attorney at 630-230-1002 for a free consultation. 

Sources:

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt.+V&ActID=2086&ChapterID=59&SeqStart=6100000&SeqEnd=8350000 

https://www.investopedia.com/terms/a/asset-based-approach.asp

https://www.investopedia.com/terms/i/income-approach.asp 

https://www.investopedia.com/terms/m/market-approach.asp