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    July 18, 2023
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    Divorce
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    Andrew Linden

Protecting Your Business During Divorce: Legal Strategies for Seattle Entrepreneurs

Your business is considered an asset, meaning it will need to be addressed during your divorce. As with any other asset, determining how to allocate your business calls for a customized legal strategy to ensure that the outcome is just and equitable.

The unraveling of a marriage or romantic partnership is a momentous event. As you tackle the logistics of separating your life from that of your ex, it’s natural to struggle with significant emotions and feel a sense of apprehension about the future. In the recent past, your vision for the future looked a certain way—now, that vision no longer serves your best interests. Working through each step of the divorce process can be a draining and challenging undertaking, but it’s essential to recognize that you are never alone. Leaning on your loved ones can be an excellent source of support. Additionally, seeking out the guidance of a trusted and understanding Seattle divorce attorney is highly encouraged, as this legal professional can empower you to make each decision with greater certainty and confidence. Even though you may feel confused and intimidated at times, you can trust that your lawyer will protect your best interests and work hard to secure you the bright and stable foundation you need to move forward and thrive. This post will explore some of the benefits of working with a knowledgeable attorney during the Seattle divorce process, particularly when it comes to protecting your small business.

Property Division During Divorce in Washington State

When a couple seeks a divorce in Washington State, one of the most time-consuming aspects of the process involves the division of marital debts and assets. Like many states, Washington is what’s known as a “community property” state. Generally speaking, this means that any assets or property that the parties acquired during the course of their marriage must be divided between them as they separate.

Separate Property Versus Community Property

When two people enter into a marriage, they usually bring individual assets with them. For example, if someone received an inheritance from a deceased relative before they married their partner, the Washington court would likely consider this asset as “separate property.” For the most part, any assets (i.e., houses, cars, real estate properties, businesses, etc.) accumulated during the marriage are considered community property—even if only one spouse’s name appears on the title. As the couple moves through the divorce process, the Court will usually view most of the assets as community property, entitling both individuals to claim such assets as they negotiate the terms of the divorce.

Striving for a “Just and Equitable” Division

Many people assume that an equitable division of property means an even fifty-fifty split. However, conversations around property division are often much more nuanced and complex; it’s actually rare for the Court to recommend such a simple approach. Instead, Washington courts strive for a division of property that is “just and equitable” for both parties. Since every marriage is different, “just and equitable” varies from couple to couple. The court uses several factors to guide its decisions for property division, such as the income and earning potential of each spouse, the standard of living the spouses enjoyed during the marriage, whether there are any children to be considered, and many other relevant considerations. Ultimately, the court aims to divide the property in such a way that both spouses are able to enjoy a financially secure foundation to support the transition from married to single life.

How Divorce Affects Your Small Business

Your business is considered an asset, just like your home or rental property. You will need to address it during the divorce process, which often requires complex and time-consuming negotiations. As with any other asset, determining how to handle your business calls for a customized legal strategy to ensure that the outcome is just and equitable. Below are a few of the most important considerations regarding how to protect your business during the divorce process.

Timing Matters

First, it’s important to identify when the business was founded. If you established your business before you married your spouse, you might be able to convince the court to consider it (at least in part) as separate property—especially if you have a prenuptial agreement that corroborates your position. Businesses founded during the course of the marriage are much more likely to be considered community property, even if only one spouse owns and runs the enterprise. However, just because a business may be regarded as community property, this does not mean that you must divide it with your spouse. The business is merely one asset in a much larger picture, so you may be able to negotiate an equitable division in which you keep the business while awarding other assets to your spouse to offset any discrepancies.

Business Valuation and Divorce

Businesses are inherently complex, especially when it comes to quantifying their value. As you prepare to negotiate the just and equitable distribution of your property, you may have to consider having your business appraised. Deciding whether to take this step is no light matter, as valuation can cost thousands of dollars to complete. Enlisting the guidance of your knowledgeable divorce attorney can help you determine the most appropriate and strategic path forward.

Options for Dividing and Allocating Businesses During Divorce

There is no one-size-fits-all model for determining how to allocate business assets during a divorce. Instead, you and your attorney should identify your specific goals and explore your options before making a decision. Let’s take a look at a few options for dividing and allocating your business as you move through the divorce process.

Buy-Out

Some divorcing couples decide that a buy-out works best for their situation. If one spouse is committed to operating the business, and their ex wants to walk away from the company, a buy-out may be an appropriate option. Buy-outs work well when one party wishes to secure a “clean break” from the business, leaving the other to run it.

Forfeit Other Assets

If your business is a top priority, you may agree to forfeit your claim to other community property to retain control of your company. For instance, you may determine it’s worth it to give up your claim to a shared home or rental property in order to keep your business in your possession. Your attorney will help you determine the best strategy for keeping your business in your hands.

Selling the Business

In some cases, your best option may be to sell your business and divide the proceeds with your ex. This option may be a last resort, especially if you and your spouse are unable to find a different way to handle your business during the divorce. There are several obstacles to overcome with this option, as small businesses may not attract a buyer, or you may not be able to sell your business for what you think it’s worth. Enlist the guidance of your attorney to help you explore this option before you make your decision.

Dividing the Business

If you and your spouse founded a company that could be separated into distinct businesses, you may want to consider this option. Perhaps you and your spouse are both accountants—why not divide your existing clients between you and start your own independent accounting firms? Of course, this option requires several considerations, so it’s worth talking it over with your attorney to determine whether it’s the best fit for you and your business.

Other Business Considerations

It’s natural to wonder how your divorce will affect your business, especially if your company has several investors and partners. As you move through the divorce, it’s essential to understand that, as a stakeholder of the company, this stake is considered an asset. The court may determine that having you liquidate your share is necessary to ensure that you meet the financial obligations of the divorce agreement. It can be difficult to keep your personal life separate from your professional life during this time, as your business partners will want to know how the divorce will affect the company’s future. As overwhelming as you may feel at times, remember that your attorney is there to help you identify the most strategic path forward and to protect your best interests, including those of your business. Together, you can create a customized plan to ensure that you enjoy the bright and stable future you deserve.

The Hemmat Law Group proudly offers customized legal guidance for all your divorce and legal separation needs in the Seattle area. We encourage you to call our office today at (206) 682-5200 to discuss your goals with a dedicated and caring attorney.

We Help Good People in Bad Situations

The Hemmat Law Group (HLG) was founded in 1994 by Steven Amir Hemmat, a former DOJ Trial Attorney. We specialize in family law, supporting victims of the legal system.

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Our divorce lawyers provide expert legal advice for all aspects of divorce, including child custody, support and property division. Contact us today.

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Article by Andrew Linden
Associate Attorney