How to protect your business with a prenup

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How to protect your business with a prenup

On Behalf of | Jan 2, 2019 | Firm News

More couples than ever before have begun to rely on prenuptial agreements. There are many reasons why couples about to marry should get this paperwork signed, such as one spouse having significantly more assets than the other.

Prenups are incredibly useful when a married couple has complicated finances. In a divorce, one spouse could lose a substantial amount of money, especially if that person owns his or her business. Many people start their own businesses prior to marriage, which is why it is a good idea to include certain terms about the division of business-related assets in the prenup.

Treat the business’ appreciation as pre-marital property

One major component of divorce involves deciding what is separate and marital property. If you started the business before the marriage, then you may assume everything related to it is separate property. However, when the business appreciates in value, your spouse may have a claim to some of that money. You can include a provision in the prenup stating all assets related to the business retain their pre-marital characters.

Create a partnership with shareholders

If you are not the sole owner of the business, then your business partners may require you to create a prenuptial agreement. They need to protect their assets, too, so it is likely everyone in the partnership will have a prenup. Typically, the shareholders’ spouses will sign an agreement waiving their rights to any shares of the company.

Maintain accurate business records

When you run your own business, you need to maintain excellent business records no matter what. It becomes even more important when a spouse comes into the mix. You need documents that show your earning potential prior to the marriage and what your earning potential is now. Having these sheets shows the judge you never intertwined business expenses with marital ones. It will save you a lot of headaches in the event the marriage ends in divorce.

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