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Why prenuptial agreements are good for business owners

On Behalf of | Jan 7, 2020 | Divorce

Some people believe that a prenuptial agreement undermines talks of commitment before a couple marries. However, choosing to speak to your partner about creating a prenuptial agreement may be of particular importance if you own or co-own a business.

Not only could this contract save your company from sale or closure during a divorce, but it also has the potential to lessen the tensions and disagreements between you and your spouse.

Identifying your business as separate or marital property

Any property acquired during the marriage is a marital asset. Property owned before the marriage is typically separate property, but there are a number of ways that your business may become a marital asset even if it is already thriving before the marriage.

If your spouse contributes to the business financially, then a judge is likely to rule that he or she owns a share of it. Your spouse may also gain interest in the company if you use marital funds from a joint account for business purposes, or even if your spouse supports you while you build the company.

Determining the financial value of your business

Before the marriage, and again in a divorce, it is essential to hire a professional appraiser to determine the financial value of your company. You will likely have to find a person or firm that specializes in the type of company you own because both tangible and intangible assets must have a dollar value assigned. For example, the appraiser must determine the value of the inventory, but intellectual property and goodwill are intangible assets that could be worth more than all the tangible assets combined.

In a divorce, a judge will also look at whether your income depends solely on the company, and how the loss of interest in the business or the sale of the business will affect your earning potential.

Recognizing what the prenuptial agreement may do for you

It is not likely that a judge will divide all the marital property without considering the value of the business. However, the prenuptial agreement may identify the value of the company before the marriage so that you can more easily define the business’s growth during the marriage.

There may be terms and conditions you can include that will prevent the loss of your company in a divorce. For example, your future spouse may sign an agreement that he or she will accept other marital property rather than demanding a portion of the business and forcing a sale.


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