When marital bliss turns sour and an Illinois couple decides to get divorced, trying to figure out who gets what is one of the main topics of heated arguments. Property division becomes increasingly complicated if the couple is also in an entrepreneurial relationship and runs a business together. Most divorcing couples either have one spouse keep the business while the other receives interest, or else sell the business and divide the assets. Rarely do they continue running the business together.
According to several successful ex-family businesses, one of the key factors in making the business partnership work is being able to respect one’s former spouse. Thus, if a divorcing couple decides to continue working together, getting professional help to address relational issues is often beneficial. Other practical considerations include creating a partnership agreement to establish what will happen if someone wants to end the business relationship, and speaking candidly with employees about what is going on and ensuring the business will not be affected.
Unfortunately for many entrepreneurial couples, continuing business after divorce may be near impossible to do because the relationship is too damaged. If this is the case, the once-family business must be divided pursuant to the state’s property division laws.
In Illinois, all marital property must be divided between the divorcing couple in a manner that is deemed equitable by the court. Marital property includes all property that is acquired during the marriage, such as the family house and furnishings, bank accounts, and some debts, as well as the family business if it was started during the marriage. Separate property, on the other hand, is left out of the equation and is not divided between the divorcing couple. Separate property includes property acquired prior to the marriage, gifts, and inheritance, as well as any property acquired with separate property. Thus, businesses started before the marriage or with separate property may be considered separate property. An added complication arises, however, if separate property is comingled with marital assets during the marriage because doing so converts it to marital property.
There are many things to consider when a marriage and business partnership comes to an end. Regardless of what divorcing business partners decide to do, it is important to understand how property will be divided at the end of both relationships and prepare as best as one can.
Source: The New York Times, “When Couples Divorce But Still Run A Business Together,” Bryan Borzykowski, Dec. 5, 2012
When Illinois business partners decide to get divorced