We have previously written on this blog about planning strategies for business owners that will allow them to avoid having to split part of their business assets with their spouse in the event of divorce.

But while careful divorce planning can do just that, it isn't always possible for every business owner to avoid having to share some of their business wealth with their spouse on divorce.

In the event that there is no way around involving one's business in the divorce, there are a number of options at one's disposal for approaching property settlement.

The first is to pay one's spouse off with one's other marital assets, such as cash, real estate, stocks, retirements accounts, and so on. Another option is to draw up a long term payment agreement with interest for the amount of one's business to which one's spouse is entitled. A third option-and most often not a preferred one-is to just sell off the business and split the proceeds.

Another option besides these three is to set up an Employee Stock Ownership Plan (ESOP), which is a tax-advantaged employee retirement plan designed to give one's employees some ownership interest in the business. An ESOP basically allows a business owner to raise money for paying off their spouse by selling a minority interest in one's business to business employees.

An ESOP is set up donating business tax contributions a special trust fund, which uses the cash to purchase a portion of the business owner's ownership interest based on its value at the time of purchase. Each employee would receive a small, ongoing ownership interest based on annual earnings, without losing any pay or benefits. Employees are able to cash in their ownership interest at its current value when they retire or leave the company.

In this option, one is able to raise money to pay off one's spouse by tapping into an already existing market for selling assets that are otherwise illiquid, and one is also able to give employees a greater personal investment in the business itself.

Source: Huffington Post, "How To Divorce-Proof Your Business: The ESOP OR Property Settlement," Jeffrey Landers, 13 April 2011.