Your family business means something to you on a personal level in addition to being a source of income. Maybe you started the business with your spouse with the dream of passing it on to your children one day. Perhaps you inherited the company from your own parents and are the third generation of your family to run the small business.
Regardless of how you came to be a business owner and your plans for the business later, your company is part of your self-identity and a major part of your life. The idea of losing the company or closing it because of a divorce might make you very anxious and sad.
Thankfully, your business isn’t always at risk when you divorce in Washington.
The company may not be community property
If you inherited the business from someone else, owned it before your marriage or protected it with a marital agreement, your spouse may not have any right to claim an interest in the business when you divorce. It is your separate property that isn’t subject to division.
However, if you started the business during the marriage, invested marital income in the company or allowed your spouse to make financial or practical contributions to the company’s development and maintenance, then they may have a claim to a partial interest in the business when you divorce. Community property laws mean that your spouse can potentially claim up to half of the company’s value in your divorce.
You don’t have to close or divide the business itself
The good news for a business owner who sincerely wants their company to remain operational after a divorce is that although Washington state law may treat their business as community property, that does not inherently require the division of the company.
You can potentially use other assets to offset what the company is worth when dividing your property or ask a judge to take the same approach. Home equity and retirement accounts are assets that may be valuable enough to justify giving up an interest in the family business.
Identifying your top priorities in a high-asset divorce can help you secure favorable results that protect your financial future.