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Is my wife entitled to part of my business in the divorce?

On Behalf of | Oct 29, 2021 | Divorce

People thinking about filing for divorce in Washington often have a lot of questions about the process. In fact, plenty of adults in unhappy marriages put off actually pursuing a divorce because they worry about what might happen.

Generally, someone delaying a divorce filing worries either about what will happen with their children or with their property. If you own a business, you likely take pride in your company. You may feel a sense of obligation to your employees or to the community to continue operating. It’s only natural to worry that a divorce might mean you have to split the company with your spouse or that you might even lose it to them.

Is your business vulnerable when you divorce in Washington?

It is common for businesses to be subject to property division

Washington, like many other states, uses the equitable distribution standard when dividing a couple’s property in a divorce. The goal is to find a way to split assets and debts between both spouses in a manner that reflects their financial circumstances.

Usually, only assets acquired during the marriage or maintained using marital assets are vulnerable to property division proceedings. If you owned the business prior to marriage, if you inherited it or if you protected it with a marital agreement that listed it as your separate property, then you may not have to split it with your spouse.

However, if you started or purchased the company during the marriage or used marital income to maintain the business, your spouse may have at least a partial claim to the value of your business in the divorce. 

You don’t have to share ownership to reach an equitable settlement

The good news for business owners hoping to protect their company in an upcoming divorce is that even if the business is subject to equitable distribution rules, that doesn’t necessarily mean they have to sell the company or share ownership of it with their ex in the future.

Instead, you may be able to use other assets from your marital estate to compensate your spouse or possibly assume more debt from the marital estate to offset your maintaining more property. You may be able to negotiate a settlement with your spouse outside of court that protects your business in your upcoming divorce.

Understanding the Washington approach to property division can help you plan for a divorce as a business owner.