Even if separating spouses are certain about their divorce, they may face the uncertainty of their respective financial futures. Not only will they have to adjust from having two sources of income to one, but they will also have to accept how the court divides and distributes the marital properties between them, unless they agree on the division.
One common worry during divorce is how the division of interests in a co-owned business will proceed.
A step you cannot skip: Business valuation
A business cannot simply, as it is, be divided into two. Before courts divide properties between spouses, it is crucial for them to first assign a monetary value to each asset so they can produce a total value, which will be their basis for the division.
Accordingly, marital businesses must undergo proper evaluation. There are different methods to evaluate a business, including methods based on assets, market and income. However, Illinois courts generally apply the fair market value approach in asset valuation.
Once it finds out the value, the court will divide the business, based on the assessed value, equitably between spouses.
Options for the amicable
Spouses who agree to settle the business’s division can choose to divide the business in any of the following ways:
- Buy the other out: Usually, when one spouse has more interest in pursuing the business, they can buy the shares of the other spouse, who is willing to sell their interests.
- Sell and split: If neither spouse sees a future in managing the business, they can sell it based on the valuation and split the proceeds between them,
- Partners only in business: In a few cases, ex-spouses who remain civil decide to own and manage the business jointly and remain business partners.
Whichever course divorcing parties decide to take, they should always incorporate what is best for their interests in their decision-making process.