If you intend to file for a divorce or if your spouse is thinking of getting divorced, it’s important to contemplate how the process may affect your business in Washington and then take the necessary steps to protect it. After all, you spent a significant amount of time and resources to get your company off the ground to where it is now.
Washington state divorce laws
Washington is a 50-50 divorce state, which means that all property acquired during the marriage, regardless of who got them, is subject to an even split upon divorce. So, if you started your business after you got married, chances are the court will deem it “community property,” and your spouse will have the right to claim half of it. Similarly, if you started the company before marriage, the family law judge will look at its appreciation from the time you got married to when you are splitting and divide that increase in value evenly as well.
How can this split affect you
If you were running your business on your own during the marriage, after divorce, the judge might force you to work together with your soon-to-be-ex-spouse because now, they will become a formal partner in the business. This can be difficult to get used to and may require some changes in your business operations. You will also have to figure out how to divide up the profits (or losses) from the company, as well as its assets and liabilities.
Another thing to consider is that if your divorce is contentious, your spouse may try to “punish” you by going after your business. He or she could make claims that the company is worth more than it actually is or that you are hiding assets in the business. Your spouse could also try to get a court order forcing you to sell the business or give him or her half of it.
The good news is you can always protect your business from such an outcome by taking some proactive steps. For instance, consider getting a marital agreement before marriage that dictates how you would handle your business in the event of a divorce. You can also take steps during the marriage to keep your business separate from your marital assets, such as keeping it in a trust or LLC. And if it’s too late, you could buy out your spouse from the business.
