How Your Business Interests Can Be Protected By Signing A Prenup

Are you wondering what the benefits are of signing a prenup to your business? We have gathered all the information you need to set your mind at ease.

Business prenup agreement

Asking your spouse for a prenup even a decade ago would have been a very awkward situation to handle. But recently, prenuptial agreements are more common as couples realize the benefits of a prenup.

No one would want their marriage to end in a divorce; having said that, having a prenup would be very beneficial if either or both of you own a business.

You may have started that business before you married and want to protect it in the event of a divorce by not letting it be subject to the court’s distribution. Here are a few ways a prenup can help save your business.

Determine The Value of The Business At the Time of Getting Married

As the owner of the business, you will be able to protect the premarital value of your business by stating it as a separate property while getting a divorce. This way, it will not be subject to any state-imposed distribution upon divorce. Remember that whatever additional value your business gained during the marriage will be subject to division under state law.

Decide How To Deal With The Depreciation or Appreciation of THe Business

You can state in the agreement if your spouse how to deal with the appreciation or depreciation of the business since you got married. You can determine how to handle the situation by judging how directly your spouse has been involved in contributing to the growth of the business or whether or not they have invested any capital into the business. You can also mention if your spouse will be sharing in the losses or profits.

Regarding the contributions, you need to ensure in the prenup that your spouse is getting fairly compensated if they are working in the business. Also, clearly state what their role is going to be in the business. This will come in handy if your spouse claims they were working at a greater capacity in the business and weren’t fairly compensated.

Their entitlement to a greater share will be minimized or eliminated if your spouse drew a market-standard salary for working in the company. You should also agree upon and state in the prenup how you plan to compensate your spouse for any indirect contribution they had in the business, for example, staying at home and raising the kids so you can focus on growing the business.

State The Means To Evaluate Your Business

You can save the time and money that an intrusive third-party evaluation process can cause by clearly stating how to value your business at the time of divorce. Third-party evaluation processes can be very intrusive and make demands from your accountants, employees, and other personnel associated with the business.

You can hire professional lawyers to help you evaluate your business at the time of divorce. Experienced prenuptial agreement lawyers in Atlanta, New York, Miami, or Los Angeles will have a team of professionals to evaluate and draw up the proper prenuptial agreement to help protect your business, especially if you are a high-net-worth individual.

State What Percent Of The Business Your Spouse Will Get

You don’t want your business subject to the same distribution guidelines that are imposed on the other marital assets. You can assign a percentage of the business value to your spouse. Suppose you specify that your spouse will receive 20% of your interest value of the business. Then this is the amount your spouse will receive, regardless of the other assets that are going to be divided equally among you.

State Clearly How To Handle Your Income

You may decide not to take a market-appropriate salary for your contribution to the business. You might opt to reinvest those funds in the business, thus limiting your capacity to create a marital property, which your spouse would be entitled to if you divorced. You can address this issue in a prenup. You will have a fair distribution of assets; a prenup can help with that.

Business couple

photo credit: Ketut Subiyanto / Pexels

Protects Partners In The Business

If your marriage ending up in divorce is putting your partner’s interest at risk, signing a prenup is a good idea, where it will be stated that the partner’s share in the business is to be treated as separate. This way, your partner’s share in the company won’t be subject to equal divisions as all the other assets.

As a partner in a business, you would never want your share to be allocated to a soon-to-be-ex of any other partner. So state this clearly in the prenup, what part of the business is to be shared with your spouse in the event of a divorce, leaving the shares of the other partners out of it.

Protects Your Employees

It won’t go well for the business if, during a divorce, your spouse is granted a portion of the business’s equity, and they start to make business decisions that would potentially jeopardize the business operations. This in turn, hampers the lives of the company’s employees, as their livelihood depends on the company’s financial well-being.

You can address this issue by signing a prenup stating that the business is a separate entity, not marital property. This way, your ex-spouse will not be awarded any part of the business, and they won’t be able to meddle in the business affairs. This way, the health of your business is protected, and so are your employee’s interests.

Summing Up

Divorce isn’t on anyone’s mind when getting married, but more couples are now finding out that a prenup can be of great help, especially when there is a business involved. Prenup helps you to address the pragmatic business decisions as well as the emotional, and romantic issues as well. So get the services of a good lawyer to draw up a prenup agreement that will safeguard your interests in the event of a divorce.

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