There’s nothing more wholesome than an Illinois, family-owned business. However, splitting that family business during a divorce can be painful.
During a divorce, the business is valued and if the divorcing couple can’t agree on how to split it, the judge could order the business to be sold. This can be devastating for multiple reasons, so most couples try to avoid it.
How to come to an agreement
If it’s determined that the couple can’t work together at all, it’s usually in their best interest for one party to be bought out of ownership. In doing so, the party that’s leaving the business will sign transfer paperwork to relinquish their rights to the business going forward.
The spouse that will be running the business will want to make sure that the transfer paperwork is crystal clear in language and leaves nothing up to assumption. The paperwork will address things like:
• Dividends / distributions
• Retirement contributions
• Health benefits
• Reimbursement of expenses
By having the leaving spouse sign this paperwork, the business owner is ensuring that their ex-spouse can’t receive any benefits from the business going forward. It can also release the company from any liability for the leaving spouse’s previous actions.
Handling non-compete contracts
Naturally, the business owner will want to protect their intellectual property. Usually, they’ll have the leaving partner sign documentation that they can’t work for certain competitors for a specific amount of time or use trade secrets for their own business.
This can become complicated with niche industries. The leaving spouse will want to thoroughly review these contracts to make sure their own ability to work isn’t impeded.
For the spouse leaving the company
The spouse leaving the company should review all of the paperwork very thoroughly. They should also look into additional release forms that will fully ensure their separation from the company going forward.
Leaving spouses who are really worried about protecting themselves from legal action regarding the business might also look into purchasing insurance to protect themselves in the event of lawsuits.
This all might sound like a lot to take in at once. But taking the time to review these tips can help ensure the business is protected – as well as the leaving spouse’s ability to make money.