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Divorcing with a business in Washington: 3 possible scenarios

On Behalf of | Apr 30, 2024 | Divorce

Washington’s marital property laws can make dividing assets during a divorce complex, especially when a business is involved. How the court deals with your company may depend on when you founded it and how or if marital funds were involved.

If you’re concerned about losing a share of the business you worked so hard to build, it is time to see what might happen in certain situations.

Founded during marriage

Say you started the business while married. Since Washington follows community property laws, you may be worried the court will split your company down the middle. It is more likely that the judge will aim for a fair division based on factors like marriage length, spousal contributions and current business value.

Founded pre-marriage but supported with marital funds

Using marital funds to support and maintain a business created before marriage could make it divisible community property. When separate and marital money are mixed together (commingling funds) in support of a business, it can blur ownership lines. The more marital income that is invested, the greater the chance that the business is subject to division in a divorce.

Founded and maintained with non-marital funds

If you established and maintained the business solely with non-marital funds, a court may consider it your separate property. However, they cannot take your word for it. You must demonstrate it with evidence like formation documents, financial transaction records and papers showing your separate bank accounts were used for the company. Even then, your spouse may still be entitled to a share.

The complexities involved with divorcing as a business owner can be overwhelming. With so much at stake, a legal opinion can provide clarity about your circumstances, resulting in well-informed divorce decisions that protect your interests.