Protect your business with a prenuptial agreement

In today’s volatile economy, there are even more reasons to take every possible step to protect your business than in years before. One such step is a prenuptial agreement. Previously believed to be only used by celebrities and movie stars, prenups can actually make a divorce much simpler and less stressful, while also protecting your hard-earned business interests.

Here’s an example. A small business owner enters into a marriage at a time when her business is worth $500,000. The seven-year-itch strikes, and the couple eventually decides to file for divorce. At the time of the filing, the business has increased in value to $1 million. Because Nevada is a community property state, all of their money and assets will be split down the middle. This means that the business owner may have to compensate her husband for half the amount of appreciation that occurred during their marriage, or $250,000. It goes without saying that this could create a significant burden on the business and the financial well-being of the owner.

But if the couple had drafted a prenuptial agreement prior to getting married, they could have specified that all money and assets earned from the business would be the sole property of the owner. This would keep the business out of the hands of the non-owner spouse and maintain its prosperity and growth.

In addition, a prenup can keep the business out of the hands of the non-owner spouse’s creditors, who will go after any money they can find to satisfy the spouse’s debt. This means that the creditors could potentially get a judgment against the business, regardless of marital status or court order. A prenuptial agreement, however, can protect the business from creditors.

Source: Forbes, “Protecting Your Business In A Divorce: Pre-Nuptial Agreement,” Evangeline Gomez, Nov. 2, 2011