What Happens to the Family Business in the Event of a Divorce?

 Posted on June 06, 2026 in High Asset Divorce

A family business adds a layer of complexity to divorce that few other assets can match. The U.S. Small Business Administration reports more than 36 million small businesses in the United States, and a significant share are family-owned. For many Illinois couples, a family business is part of the divorce. 

Unlike a savings account or a home, a business cannot simply be split or sold without first working through a number of legal and financial questions. It has to be valued, classified as marital or non-marital property, and then resolved, sometimes while it is still operating. If that describes your situation and you are planning to file for divorce in 2026, a Wheaton, IL divorce attorney can explain how Illinois law applies to your case.

Is a Family Business Marital Property in an Illinois Divorce?

Under 750 ILCS 5/503 of the Illinois Marriage and Dissolution of Marriage Act, most assets acquired during the marriage are considered marital property. This is true regardless of whose name is on the title and this applies to businesses, too.

Whether a business is marital or non-marital property depends on when and how it was started. A business one spouse founded before the marriage is generally non-marital property. But that protection can be lost over the years. If marital funds helped grow the business, if the other spouse contributed work, or if joint money paid business expenses, the court may find that part of the business has become marital property. This is called commingling. It is one of the most common reasons a business one spouse considered entirely their own ends up subject to division.

How Do Illinois Courts Value a Family Business in Divorce?

Illinois courts typically rely on three valuation methods:

• The income approach values the business based on what it is expected to earn going forward.

• The market approach compares the business to similar businesses that have recently sold.

• The asset approach adds up what the business owns and subtracts what it owes.

Under 750 ILCS 5/503(l), the court can appoint its own independent evaluator if the parties cannot agree on a value. Each spouse can also hire a separate evaluator. These separate valuations sometimes produce two very different numbers, and an attorney can help you understand which method works in your favor.

Illinois courts also distinguish between enterprise goodwill and personal goodwill. Enterprise goodwill belongs to the business itself, including things like its brand, customer base, and established systems, and it may be considered a marital asset. Personal goodwill is tied to an owner's individual reputation, skills, or relationships and is generally not treated as a marital asset. As a result, a business that depends heavily on one spouse's personal reputation may be valued differently than one with goodwill that exists independently of its owner.

What Are Your Options for Resolving a Family Business in Divorce?

Buying Out Your Spouse

The most common outcome is one spouse buying out the other's interest and keeping full ownership. If you are the one running the business, keeping it in exchange for other marital assets of equal value is often the cleanest path forward.

Jointly Running the Business After Divorce

Some couples continue operating together after the marriage ends. This requires a written agreement that should cover decision-making, profit sharing, and an exit plan if the arrangement eventually breaks down.

Selling the Business and Splitting the Proceeds

If neither spouse wants to buy the other out, the court may order the business sold and the proceeds divided. This often produces a lower sale price than a planned sale would, so most parties try to avoid it.

Structured Payout

When a lump-sum buyout is not possible, spouses can agree to a payment plan. The operating spouse pays out the other's share over time, often with interest.

How to Protect Your Business Before and During an Illinois Divorce

Keeping business and personal finances separate is one of the most important things you can do to protect your interests, whether divorce is a distant possibility or already underway. When accounts are mixed, or business revenue is used for personal expenses, it becomes much harder to argue that the business is non-marital property. 

A prenuptial or postnuptial agreement that addresses business ownership can prevent these disputes in a divorce. If your divorce has already started, you’ll need financial records going back several years. Tax returns, profit and loss statements, payroll records, and any prior valuations will all be relevant to how the business is classified and valued.

Schedule a Free Consultation with a Wheaton, IL Divorce Attorney Today

If a family business is part of your divorce, our attorney at Fawell & Fawell is ready to help. Attorney Alex Fawell has more than 10 years of legal experience and served as a federal judicial clerk and 711 law clerk for both the DuPage County and Cook County Public Defender's offices. His approach is practical and results-oriented, with your family's future as the priority. Fawell & Fawell offers free consultations. Call 630-871-2400 to speak with an experienced DuPage County, IL high asset divorce lawyer at Fawell & Fawell today.