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What happens to the family business in the event of a divorce?

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From small, home-based businesses to multi-million-dollar enterprises, family-owned businesses play a huge part in growing the U.S. economy. In fact, it is estimated that there are well over 24 million family-owned businesses in the United States. If your marriage is over and you are considering a divorce, however, one of the questions you will certainly grapple with is what will become of the family business once you go your separate ways.

One of the factors that determine the fate of the family business during divorce is each spouse’s contribution and role in the business. Here are a couple of possible outcomes:

Buying out your ex

Just like with the family home, you may buy out your spouse and retain 100 percent ownership of the business. For instance, say you are running a dental clinic where you are a trained dentist while your spouse is the administrator. In this case, you may buy out your spouse (now ex) so you can retain full ownership of the business and outsource the administrative role.

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How could your spouse hide assets?

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Most people do not try to hide assets during a divorce, knowing that doing so can get them into a difficult legal position. If the court orders them to fully disclose the assets that they own and they intentionally leave things out or try to manipulate the numbers, they can be in violation of that court order.

However, there are those who decide that they are going to hide assets so that their spouse gets 0% of those assets, rather than the percentage allocated by the court. It’s important for you to know how this may happen and what tactics they could use so that you can see any warning signs in advance.

Examples of tactics people use

It is certainly important to remember that every case is unique and you know your spouse better than anyone else. That being said, here are some examples that people have used in the past, which you may want to look for:

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Don’t let hidden assets devalue your divorce settlement

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One of the most pertinent parts of the divorce process is the division of assets. In Illinois, the family court divides marital assets based on the equitable distribution doctrine. This means that marital assets will be divided in a way that seems fair to all parties.

The process of equitable distribution only works on the condition that all marital assets are disclosed properly. If this isn’t the case, then it is no longer equitable. How can you tell if your spouse is attempting to hide assets?

Asking you to sign some mystery documents

Your spouse has called and asked if you wouldn’t mind signing some documents. You said you’d take a look so they came around. Upon arrival, they seem flustered. They thank you for taking a look at the documents but state they cannot hang around for long. They assure you that it’s nothing to worry about and that the papers are "just an administrative thing" that they need to get sorted out.

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When should you be suspicious that your spouse is hiding assets?

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Secrets often come to light during the divorce process. Sometimes those are financial secrets – big ones. You have a right to a fair property settlement in your divorce, but you can’t get that if your spouse isn’t being completely honest and transparent about finances.

Both parties are required to provide full and accurate financial information to the other. If your spouse has always been the one to handle the family finances or if they have complex assets, like stock options with their employer, ownership in property or businesses or overseas investments, it may be wise to add a financial advisor to your divorce team.

Common red flags

Before you do that, let’s look at some red flags that your spouse may be hiding or undervaluing assets – whether they did it throughout the marriage or only now that they risk losing some of them in the divorce.

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3 behaviors that may be dissipation of your marital assets

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In an Illinois divorce, spouses need to split their property or ask a judge to divide their assets. The equitable distribution rule that applies in litigated divorces requires that a judge split your property and debts in a fair manner based on your current circumstances. Your health, the length of your marriage and even financial misconduct can influence how the courts split your property.

In cases of provable dissipation by one spouse, the other could ask for compensation for that misconduct. What kinds of behaviors might be dissipation of your marital assets?

Spending for selfish purposes right before or after filing

A pattern of spending consistent with someone's behavior during the marriage would not likely constitute dissipation.

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