Imagine building a thriving company from its first days as an internet start-up to its IPO on the market. Then consider learning that because you and your spouse are divorcing, you will have to sell your interest in the business in order to pay him or her off when settling marital property matters.
Such a turn of events can be both emotionally and financially devastating. In some ways, a carefully-curated business venture becomes like another child. You invested more than just money into your company. You imbued it with all of your hopes and dreams for your future. Selling it outright or even a minority share will never sit right with you even if the Illinois courts demand it.
There are better ways of handling your business in a divorce. If you failed to negotiate a prenuptial or postnuptial agreement, you can still fight to salvage your company.
Your goal should be to settle with your spouse financially using assets that are not tied into your business venture. This can mean some unpopular sacrifices may need to be made regarding big-ticket items like your interest in the family home or a retirement account. But retaining full ownership rights to your business will allow you to actively grow the company and increase future profits.
When it comes to making payouts to spouses for their shares of jointly-owned businesses, try to do so over time. If feasible, the payouts can be structured over an extended period of up to a decade. If your spouse is not amenable to that and insists on an immediate payoff or continued ownership in the company, you may have to take some drastic measures.
That could include selling a portion of your interest to a neutral third party to pay off your spouse. While not the most favorable option, doing so allows you to sever the business and financial ties between you and your ex. At some future point, you may be able to repurchase all or part of the shares you sold to the neutral party.
By working closely with your family law attorney through all phases of your divorce, you can pursue the most favorable settlement options for your divorce.
Source: Inc., "Divorce-Proofing Your Company," Jill Andresky Fraser, accessed June 30, 2017