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How to protect your business interests by signing a prenuptial agreement

How to protect your business interests by signing a prenuptial agreement

Wondering what the benefits of signing a contract for your business are? We have gathered all the information you need to put your mind at ease. As

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Wondering what the benefits of signing a contract for your business are? We have gathered all the information you need to put your mind at ease.

Business pre-up agreement

Asking your spouse for a marriage contract even a decade ago would have been a very awkward situation to deal with. But recently, prenuptial agreements have become more common as couples realize the benefits of a prenuptial agreement.

No one will want their marriage to end in divorce; That said, a marriage contract will be very beneficial if one or both of you own a business.

You may have started that business before you got 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 some ways in which a pre-up can save your business.

Determine the value of the business at the time of marriage

As the owner of the business, you will be able to protect the prenuptial value of your business by declaring it as a separate property while you are getting a divorce. In this way, it will not be subject to any state-imposed distribution upon divorce. Remember that any additional value your business acquired during the marriage will be subject to division under state law.

Decide how to handle the depreciation or appreciation of the business

You can indicate in the agreement or your spouse how to handle the valuation or depreciation of the business since you were married. You can determine how to handle the situation by judging how directly your spouse was involved in the growth of the business and whether or not they invested any capital in the business. You can also mention whether your spouse will share in the losses or gains.

As for the contributions, you must ensure in the contract that your spouse is fairly compensated if they work in the business. Also state clearly what their role in the business will be. It will come in handy if your spouse claims that they worked with greater capacity in the business and were not fairly paid.

Their right to a larger share will be kept to a minimum or eliminated if your spouse has received a market standard salary to work in the company. You must also agree and indicate in the contract how you plan to compensate your spouse for any indirect contribution they have made to the business, for example to stay at home and raise the children so that you can focus on the growth of the business.

Name the ways 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 on your accountants, employees and other staff related to the business.

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

State what percentage of the business your spouse will receive

You do not want your business to be 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 from the business. Then this is the amount your spouse will receive, regardless of the other assets that will be divided equally between 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 can choose to reinvest those funds in the business, thus limiting your ability to create a matrimonial property, to which your spouse would be entitled if you divorced. You can address this issue in a pre-up. You will have a fair distribution of assets; a pre-up can help with that.

Business Couple

Photo credit: Ketut Subiyanto / Pexels

Protect business partners

If your marriage ending in a divorce jeopardizes your spouse’s interest, signing a marriage contract is a good idea, where it will be stated that the partner’s share in the business should be treated as separate. This way, your partner’s share in the company will not be subject to equal distributions like all the other assets.

As a partner in a business, you will never want your share to be awarded to a soon-to-be ex of any other partner. So make it clear in the contract what part of the business should be shared with your spouse in the event of a divorce, and exclude the shares of the other partners from it.

Protect your employees

It will not go well for the business if, during a divorce, your spouse is granted a portion of the business’s equity, and they begin to make business decisions that could potentially jeopardize the business operations. This in turn hinders the lives of the company’s employees, as their existence depends on the company’s financial well-being.

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

Summary

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

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