Owning a business with your spouse can be an exciting adventure and a great way to support your family. However, couples should keep in mind that if they ever get divorced, they will have to make difficult decisions about what happens to the business.
Illinois is an equitable distribution state, meaning that the court will fairly divide up any marital property between the spouses upon divorce. Before doing that, the court will have to determine whether the business interest is considered marital property, by looking at whether it was acquired during the marriage, or with marital funds. The courts will also need to determine the value of the business.
A divorce can be time-consuming and pull your attention away from running your business. During the divorce, you may have to perform a business valuation by scheduling an appraisal. You and your spouse may have to spend time putting together documentation for the appraisal as well as consult with your attorneys and business appraisers and go to court during the workday. Your employees may also have to participate in the process, which could keep them from running the business as usual.
While Illinois is an equitable distribution state, it does not mean that all assets will be divided 50-50 between the spouses. In other words, it is possible that you may end up with a smaller stake in the company than your partner, if they end up with shares of the company. If your partner ends up leaving the company or selling their shares, it will up to you and other employees to fill in for them.
Continuing to work with them may also be an option, but it can be very difficult for newly divorced spouses to continue to work together on a daily basis. In some cases, it may be in everyone’s best interest to dissolve the business.
If you have not decided to divorce yet, you and your spouse can avoid many of these challenges by having a pre-nuptial or post-nuptial agreement in place. Your agreement can detail the distribution plan for your business in case you get divorced.
