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Issues that May Arise in Dissolution of Marriage When One Spouse Owns a Business

Dissolving a marriage can be difficult even in relatively simple, straight-forward circumstances.  Things can become much more difficult in divorces that involve a business owned by one or both spouses.  The end of a marriage can also mean the end of the business.  Ending the business is not always in the best interest of the divorcing parties.  Below are a few issues for consideration by parties seeking to dissolve their marriage in Washington, when one or both spouses own a business.

  1. Valuation: If the business is a substantial asset of the parties, it is usually worthwhile to have it appraised. It is difficult to know how much the business is worth without the assistance of a professional appraiser.  However, if both spouses are involved with the business and have had equal access to the financial information of the business it might be possible for parties to agree on the cost of the business.  This also may be true if the parties both agree that the business is of little economic value to the parties.
  2. Community Property:  Some divorcing spouses assume that ownership of the company will remain with the person that is the named owner of the company.  In reality, because Washington is a community property state, even a company that only one spouse has been involved in and only one spouse is the named-owner of the company may be owned by both parties.  There are exceptions to this rule, but in many cases the unnamed spouses are surprised to realize that they have ownership in a company via Washington’s community property laws.
  3. Continuing Joint Ownership: If the business is a relatively low-maintenance business that only requires limited involvement of the (soon-to-be former) spouses and the spouses get along well, it may be possible for the parties to continue owning a business as co-owners.  This can be especially true if the business merely holds assets (like a company formed merely to hold real estate).
  4. Keeping the business and paying the other party over time: Sometimes one party would like to maintain ownership of the company after dissolution (i.e., not be forced to sell to pay off the other party).  Some people in this position are worried about how they will pay the other spouse off so that they can remain the sole owners of the company.  Sometimes, it is in the best interest of both parties (and the business itself) for the non-owner spouse to be paid over time.  This can be worked out as part of a property settlement agreement.
  5. Splitting the business: In some cases it makes sense to split the business into two and have each spouse take control and ownership of one-half of the company.  With proper agreements in place, this can allow both parts of the company to continue to earn money for each spouse.

If you or your spouse owns a business and you are considering dissolution of marriage, you may want to speak to a family law attorney.  If you are in the Seattle area, we would be honored if you choose to contact us.  Blair & Kim is prepared to assist you with all your family law issues.