As a business owner, you’ve spent years nurturing, building and growing your business. Naturally, you want to do everything in your power to protect it. If you’re planning on getting married in the near future, it’s important to consider a prenuptial agreement. While you’re not thinking about divorce, it’s still a very real possibility that you should be prepared for.
A prenup will give you and your business added protection in case of divorce. Here’s why every business owner needs to have a prenup.
Protect Your Business
One of the key reasons to sign a prenup before saying “I do” is to protect your business in case of divorce. Many states are community property states. This means that, under law, all property that is acquired during the marriage belongs to both spouses. If your business increases in value, then the value of your community property will increase as well.
In addition, the work that a spouse engages in during the marriage will be treated as community labor, meaning that all compensation and benefits are considered community property.
If there are no provisions pertaining to divorce in your company’s operating agreement, your spouse may be entitled to a stake in the company and a portion of its assets.
Protect Your Partners
As mentioned previously, without a prenup in place, your spouse may be entitled to a stake in the company. This may not sit well with your partners, and can lead to unresolvable issues. Before walking down the aisle, sit down and talk with your partners about your pending marriage.
Take steps to ensure that provisions are put into your operating agreement that dictate how things will be handled in case of divorce. Giving partners or shareholders the right to purchase the spouse’s interest in the business can, essentially, “lock” the spouse out. You may also require your spouse-to-be to sign a waiver of his or her future interests in the company.
These are difficult conversations to have with your soon-to-be husband or wife, but they’re necessary if you hope to protect your business through a prenuptial agreement.
Divorces can be incredibly complex, especially if a business is involved. Taking proactive steps to protect your business through a prenuptial agreement is a wise choice. Be sure to work with an experienced attorney when drafting your prenup to ensure that it will be able to stand up in court. A well-drafted prenuptial agreement will be your best defense when it comes to protecting your business and its assets in a divorce.
The Micklin Law Group, LLC is a New Jersey law firm focusing on Family Law and High-Asset Divorce. Attorney Brad Micklin was recently named to The National Advocates list of Top 100 attorneys from each state. To set up a consultation, call 973-562-0100.