How Divorce Impacts Business Ownership in Washington: Protecting Your Assets

Divorce can affect nearly every part of your life, and if you own a business in Washington, the impact can be especially significant. A business often represents years of hard work, financial investment, and personal sacrifice. During divorce, however, questions about ownership, control, and value inevitably arise. Understanding how the law treats business interests, and taking steps to protect your company, can help preserve what you’ve built.

Washington is a community property state, which means assets acquired during the marriage are generally considered jointly owned. This includes businesses that were started during the marriage or significantly increased in value after the wedding. Because of this, business ownership can quickly become one of the most complex issues in divorce. The best way to protect your interests is through early planning and sound legal guidance.

Washington’s Community Property Law Explained

Community property law requires that marital assets be divided equitably, though not always perfectly equally. If you owned your business before the marriage, it may qualify as separate property, but any growth or income generated during the marriage may be considered community property. Courts carefully review financial records, contracts, and business history to determine whether the company is partially or fully subject to division.

Determining the Value of the Business

Once it’s established that a business is community property—or partly community property—the next step is valuation. This is often one of the most disputed areas in divorce. Forensic accountants and valuation experts are commonly brought in to assess the true worth of the company. They may use one of several methods: the income approach, which looks at profits and future earning potential; the market approach, which compares the business to similar companies recently sold; or the asset-based approach, which tallies up the value of equipment, property, and other assets.

Options for Handling Business Interests During Divorce

After valuation, divorcing spouses must decide how to handle ownership. The most common option is for one spouse to buy out the other’s share, allowing the business to continue under one owner. In some cases, spouses agree to sell the business and divide the proceeds. While less common, continued co-ownership after divorce is also possible, though it requires an unusual level of cooperation and trust.

Protecting Business Interests Before and During Divorce

Planning ahead can make a major difference in protecting your company. Prenuptial and postnuptial agreements can establish in advance how a business will be treated in the event of divorce. Clear corporate records and well-drafted operating agreements can also strengthen your position. Perhaps most importantly, avoiding the commingling of business and personal funds helps prevent confusion over whether the business is separate or community property.

How Divorce Affects Business Operations

Divorce doesn’t just impact ownership—it can also disrupt day-to-day operations. Disputes over control and decision-making may arise, especially in jointly owned businesses. Additionally, financial records often become part of divorce proceedings, raising concerns about confidentiality. These issues can affect not just the spouses but also employees, customers, and business partners.

The value of early legal advice cannot be overstated. By working with an experienced divorce attorney, you can take steps to protect your business, ensure fair treatment, and preserve its integrity for the future.

FAQ

Q1: Is my business considered marital property in Washington?

A: If it was started or significantly grew during the marriage, it may be considered community property.

Q2: How is a business valued during divorce?

A: Professionals evaluate financial records, assets, and earning potential using established valuation methods.

Q3: Can my spouse force the sale of the business?

A: In some cases, yes—especially if no other equitable division is feasible.

If you are facing divorce and own a business in Washington, we can help. At John L. Davis PLLC, we understand the stakes and provide skilled guidance to protect what matters most. Call us today at (360) 597-4740 to discuss your case.