Numerous Washington residents are proud owners of small businesses that they have grown through hard work, sweat and maybe a few tears. By creating, following and adjusting business plans as necessary, these companies can be very successful. Unfortunately, there is one thing that many business owners often do not plan for, and failing to do so can have an extremely negative impact on their companies. That one thing is divorce.
How to protect your business
Divorce does not have to destroy a business, but it can change an owner’s role and future financial benefits if certain precautions are not taken before marriage. The best precaution business owners can take is to set up a valid prenuptial agreement that states their companies are property separate from marriage. For this type of document to be valid, both parties must willingly agree to the terms, all assets must be disclosed and the provisions have to be fair. If a prenuptial agreement was not created, or a business was started during the course of a marriage, a postnuptial agreement may work just as well.
There are several other actions a business owner can take to protect their company long before divorce ever enters the picture. Maintaining a regularly updated will, detailing company ownership in a buy or sell agreement, and utilizing a domestic asset protection trust so that the company becomes an asset of the trust can all make businesses immune from asset division.
Can a business be shared property?
The one significant issue that can affect a business when getting a divorce is if a spouse claims the business as shared property. Washington is a community property state, meaning both parties should walk away with basically a 50/50 split of marital assets. If a spouse can successfully prove that the business is marital rather than separate property, he or she could end up owning half of the company or walking away with a large payout. The exact terms would need to be worked out and included in the property division settlement.
Divorce can do a lot of damage if proper precautions are not taken. With the right assistance, this damage can be minimized. An experienced family law attorney can help business owners do what is necessary to protect their companies by planning ahead or by fighting for just and comprehensive settlement terms.