How to Keep a Family Business from Being Divided in a Divorce

1. If you owned the business before marriage, its initial value is usually considered separate property. However, any increase in value during the marriage will likely be deemed as community property.

2. If acquired after marriage, how it was transferred can determine if it’s separate or community property. Inheritances, purchases, and sweat equity are all factors.

3. The best way to protect a business asset is through a prenuptial agreement (If the asset was owned prior to the marriage).

4. Properly structuring the business when it is formed can help determine share value and ownership, which provides clarity in the event of a divorce. Keep in mind in a Community Property state like Washington, even if a spouse isn't listed as an owner, they still have an interest in the business due to the marriage.

5. If the business is community property, look for other assets or payout arrangements to compensate the spouse, such as equity in the home or retirement accounts to keep your shares of the business.

For more detailed advice or assistance, contact us at [email protected] or call us at 509-866-4842.

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