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How divorces impact businesses

On Behalf of | Nov 1, 2019 | Divorce

When business owners in Illinois get divorced, it can take a toll on their companies. This may be true whether a former spouse may become a part-owner of the organization. During the divorce itself, an individual may have to split his or her focus between ending a marriage and running a company. If an enterprise is owned by multiple people, the end of a marriage could be a distraction for everyone responsible for running it.

Businesses with multiple owners may use buy-sell agreements to buy a divorcing partner’s share of a company. However, without such an agreement, it may be necessary for a company to go into debt to keep it out of the hands of an owner’s former spouse. Three owners of startup company GreenPal had to personally guarantee a $250,000 loan to buy out a fourth owner who was ending his marriage.

One key benefit of a buy-sell agreement includes the ability to determine the cost of a buyout ahead of time. This may prevent stress or anxiety related to having to repay a significant amount of money. However, it may be possible to challenge the terms of such a pact in court, which means that its terms need to be legitimate in the eyes of a judge.

In a divorce, most types of property that are accumulated during a marriage may be subject to division. This could include an ownership stake of a company or a share of any profits generated during the marriage. If a couple has a prenuptial or postnuptial agreement, it may determine how a company is divided when their marriage ends. An attorney may review such an agreement to determine its validity. Legal counsel may also examine these agreements before they take effect.