Legal Question in Business Law in Illinois

business - sole proprietor vs. incorporation

I have a business for over 8 years as a sole proprietorship. My husband helps some, but works full-time in his own IT career of 15 years. I mentioned that it might be a good idea to look into incorporating the business for tax reasons, etc. He went online and was able to incorporate the business without my knowledge or consent. He received all the documents in the mail, and I was then presented with documents to sign stating my % ownership and his. He wanted 50/50. I disagreed since we don't work it 50/50, and I just don't understand it enough. Without my sign on this doc, does that mean I am still legally a sole proprietor? If we were to divorce, would he be legally entitled to more of the biz if it were incorp with him having a certain % ownership vs. me staying a SP? He is trying to tell me no because as a married couple, with a SP, it would be split 50/50 anyway, but if I would incorporate and decided that he should only be 30% owner, then I would actually be more protected because I would only have to buy him out of his 30% upon divorce. He told me, however, that whatever % I decided he should be, that I would need to sign a letter stating I would only receive that % of his pension/401K. Is this correct?


Asked on 4/17/08, 9:04 pm

1 Answer from Attorneys

Zedrick Braden III Ainsworth & Associates PC

Re: business - sole proprietor vs. incorporation

Hello. I am sorry that you are going through such a stressful ordeal. Under Illinois law, any profits or assets acquired during the marriage are considered marital property. Whether you incorporate or not, the assets of your business and the profits will retain their marital status since they were acquired during the marriage to your husband.

The fact that your husband incorporated the business does not affect the marital status of the assets and profits of the business. Of course you are not obligated to sign an agreement to restrict your right to your husband's pension/401k. As long as you do not sign any documentation, nothing changes. I will be happy to answer any additional questions that you may have.

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Answered on 4/18/08, 2:47 am


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