If a family business constitutes a major portion of your marital property, Illinois law requires you to divide it between you and your spouse in a fair and equitable manner when you divorce. But how do you do this?
Forbes advises that you have three basic choices as follows:
- Sell the business and equitably share the proceeds
- One spouse buys the other spouse out
- Both spouses continue to own the business
Each choice has its own pros and cons.
Selling may be the quickest way for both of you to achieve a major cash inflow. Or it may not, depending on how quickly your business actually sells. In addition, you will first have to determine not only the overall selling price, but also the amounts of your and your spouse’s respective ownership interests. This likely will require that you engage a professional business evaluator, resulting in a major pre-sale expense.
If selling is not an option because one of you wants to keep the business, a buyout by that spouse of the other’s interest likely becomes your best option. Here again, however, you must first determine the overall value of your business plus the values of your respective ownership interests. Then the spouse who stays must find a way to pay the spouse who leaves. Generally, (s)he will choose one of the following methods:
- Give the leaving spouse nonbusiness marital assets equal to his or her business ownership interest.
- Get a venture capitalist or new business partner who will bring sufficient cash into the business to pay the leaving spouse.
- Get a business loan to pay the leaving spouse, usually over time and with interest.
Continued joint ownership
Believe it or not, many divorced couples continue to successfully own and operate their family businesses. In terms of your business itself, this is the best option because it requires no interruption while an attempted sale takes place or a new partner comes on board. In terms of you and your spouse, however, this option requires that both of you have great maturity and the ability to separate your personal lives from your business lives.