Starting a business during a marriage gives an individual and/or couple an opportunity to provide a better standard of living for their family and to more effectively control their schedule. It’s common for entrepreneurs to devote years of their lives and thousands of dollars to the development of a successful small business or professional practice. Being an entrepreneur or successful business owner can become a big part of someone’s self-identity.
It may also be an individual’s or a couple’s primary or sole source of income. As a result, family business owners often worry about what might happen to their company if they file for divorce. People naturally don’t want to lose the company they built, and they would often prefer to avoid working with their spouse after their divorce. Therefore, making informed decisions under these circumstances is key to safeguarding one’s business interests and ultimately achieving some peace of mind concerning what the future is likely to hold.
A business may be classified (partially or totally) as community property
If someone started a marriage during their business or invested marital income in the company, at least part of the organization’s value could be part of the marital estate and subject to division. However, Washington’s community property laws don’t automatically result in the forced sale of the business or in order to share its ownership in operation with a former spouse. Instead, the courts can consider the company’s value and then factor that into a determination about property division. Many business owners will find it very important to pay close attention to the business valuation process, as the value set for the organization will have a major impact on the outcome of the divorce.
For those who feel very strongly about achieving specific outcomes, such as avoiding a spouse having an ownership or managerial interest in the organization after the divorce, attempts at collaborative negotiations or divorce mediation may give them more control over the outcome. Owners who settle with their spouses can ensure they retain ownership and managerial authority if they may concessions in other aspects of the divorce.
Recognizing that a business will be a major complicating factor in a Washington divorce could help people take thoughtful steps to protect their financial interests in a business during the end of a marriage.
