If you and your husband or wife own an Illinois business, it likely represents your largest marital asset as well as your major, if not only, source of income. Consequently, should you decide to divorce, splitting up this business between the two of you becomes a primary consideration.
Generally, you and your spouse can choose from among the following three options regarding what to do with your family business when you divorce:
- Continued joint ownership
Not surprisingly, each of these options carries with it its own good points and bad points.
A straightforward sale of your business may be an option if neither of you has strong ties to it and both of you are willing to walk away and pursue other endeavors. Assuming the commercial real estate market remains strong in your area, both of you can anticipate receiving a large cash influx in a reasonably short time with which you can do whatever you choose, including establishing new businesses.
On the other hand, to sell your business and split the proceeds, you will first need to determine its overall value, how much your respective shares are worth, and a reasonable sale price. This may entail the necessity of your hiring a professional business valuator whose fees likely will be substantial.
If only one of you wants to sell and the other wishes to continue owning and operating the business, one option is to have the staying spouse buy out the leaving spouse’s business share. Again, you will need to calculate your business’s overall value and the value of each spouse’s share. After doing this, the staying spouse must determine how (s)he will pay the leaving spouse. In most circumstances (s)he will need to do this in one of the following three ways:
- Give the leaving spouse nonbusiness marital assets equal to the value of his or her business share
- Bring new cash into the business, such as via venture capital or a new partner, with which to pay the leaving spouse
- Obtain a business loan to pay the leaving spouse, possibly over an agreed-upon period of time and with interest
Continued joint ownership
This option may seem the least intuitive of the three. After all, if you and your spouse have sufficient issues that make it impossible for you to continue your marriage, how can you work together after your divorce? Despite this overarching question, however, it may surprise you to learn that some divorced couples do indeed continue to successfully own businesses together. If your personal issues do not spill over to your business lives and you have always worked well together, you may opt for continued joint ownership. It represents one option for your business per se since it entails no downtime while you seek to sell it or acquire a new partner for it.
Ultimately, you and your soon-to-be former spouse will need to seriously consider which option may work for your particular situation. It goes without saying that divorces almost always cause considerable stress for both spouses. Layering business considerations on top of all your other issues can make an already complicated situation even more complicated.