What Happens to My Shares in a Business During Divorce?

 Posted on October 07, 2024 in Asset Division

If you are going through a divorce and own shares in a business, you might be worried about what will happen to your ownership stake. In Illinois, marital property laws may impact your shares, especially if they were acquired or increased in value during the marriage. Depending on the circumstances, your spouse might be entitled to a portion of the business value.

To protect your valuable business assets and understand your options, it is crucial to speak with an experienced Kane County, Illinois divorce attorney who has specific experience helping business owners with complicated, high-worth assets. At Weiler & Associates, Inc., we can help you secure your ownership stake and ensure that your business continues to thrive throughout and after the divorce.

Can My Spouse Claim Ownership of My Business Shares?

Yes, in Illinois, your spouse may have a claim to a portion of your shares if they are considered marital property. Illinois follows an "equitable distribution" model, meaning that assets acquired during the marriage are divided in a way that is fair, though not necessarily equal. If your shares were obtained before the marriage, they might be considered non-marital property.

However, if the business grew in value during the marriage due to your spouse’s efforts or contributions from marital resources, like your or your spouse’s income, that increase in value may be subject to division. An attorney can help determine which parts of the business are considered marital and which are not, which can be crucial in protecting your ownership.

How Can I Protect My Shares in a Family Business During Divorce?

If you own shares in a family business, it is particularly important to protect those shares from being divided during a divorce. One of the most effective ways to protect your ownership is by having a prenuptial or postnuptial agreement in place that clearly states that your shares are separate property and will not be subject to division. For example, if you signed a prenuptial agreement before marriage, specifying that your 30 percent stake in a family restaurant is solely yours, it would generally prevent your spouse from claiming those shares as marital property.

Another way to protect your shares is through a shareholder agreement. This document can include restrictions on transferring shares without approval from other shareholders. For instance, if you and your siblings each own a portion of a family business, a shareholder agreement might state that if one of you divorces, your shares cannot be transferred to a spouse without consent from the other shareholders. This helps ensure that ownership remains within the family and avoids the risk of an outside party becoming involved in business decisions.

Can I Protect My Shares in a Large Corporate Business During Divorce?

If you own shares in a large corporate business, the situation can be slightly different but still requires careful attention. Shares in publicly traded companies are often considered marital property if they were acquired during the marriage or if marital funds were used to purchase them. This means your spouse may be entitled to a portion of the value of these shares during the divorce process.

However, there are ways to protect these shares. One option is to try and negotiate a settlement that allows you to keep your shares in exchange for giving up other assets of equivalent value. For example, you could agree to give your spouse a larger portion of the marital home or retirement accounts in return for retaining your stock portfolio.

How Does Business Succession Planning Help During a Divorce?

Business succession planning can be an effective tool to protect business shares during a divorce. If you are part of a family business or a partnership, a solid succession plan can help ensure that your shares remain within the business and are not transferred to your spouse. A well-crafted succession plan often includes buy-sell agreements, which allow the other business owners or partners to buy your shares if certain events, like a divorce or death, occur. This kind of agreement can prevent an unwanted transfer of ownership and keep the business's stability intact.

Succession planning is also helpful when considering long-term ownership, especially if you want to ensure that the business remains in your family. This is particularly important if you have children whom you want to inherit the business eventually. By creating a detailed succession plan that clearly states how the shares will be managed and transferred, you can minimize the risk of losing control over the company during a divorce.

Contact a Kane County, IL Divorce Attorney

Protecting your business interests during a divorce can be complex, especially when ownership of shares is involved. Whether you own part of a family business, have shares in a large corporate entity, or need help with succession planning, it is crucial to have an attorney on your side who understands both business and family law. Contact a St. Charles, IL divorce lawyer for business owners at Weiler & Associates, Inc. today at 630-331-9110 to discuss your options and learn how we can help protect your ownership stake and ensure a fair outcome.