How can you protect your business during a partner’s divorce?

On Behalf of | May 10, 2022 | Family Law |

Washington business owners might worry when their partner is going through a divorce. It’s fair to wonder whether the partner’s spouse could end up as part-owner with the divorce settlement.

Can a former spouse gain part of your business?

If you own a business with a partner who’s going through a divorce, you might fear that their spouse will gain a significant percentage of the company and become part-owner. However, this doesn’t happen unless the spouse is also already involved in the business. Instead, they could end up gaining money from the value of the business in the divorce settlement. There are certain situations when that might happen.

The business might be considered marital property based on certain factors such as when the business was founded. If it was founded during the marriage, the partner’s spouse might be entitled to half of its value. This is even more relevant if the other spouse supported the business partner financially while they obtained their education.

How can the business be protected in a divorce?

There are ways a person can protect their business during a divorce. One way is to have a prenuptial agreement created prior to the marriage if the business already exists before the wedding. A postnuptial agreement is similar but is drafted after the couple is already married.

If there is no prenuptial or postnuptial agreement in place, the divorcing business partner would have to pay out their spouse. Liquidating interests or paying with shares of stock in the company could achieve that.

It might be necessary to have the business valued so that the spouse of the partner getting a divorce knows an actual number in terms of the amount of money they might receive in the divorce settlement. They could receive that money in installments or one lump sum and remain out of the business itself.

Divorce can be tough when you own a business, but it doesn’t have to end up changing ownership.