Prenuptial Agreements for Business Owners
Congratulations — you're engaged, or about to be. This is a time to celebrate, call friends and family and, if you are a business owner, check in with your lawyer.
When you own a business it can be like coming to a marriage with another family. Your employees and business partners are all affected by the marriage, for better or worse. Partners especially have an interest in knowing that your share of the joint business won't suddenly be transferred to a third party. Having a prenuptial agreement that accounts for what happens to the business in the event of divorce is one way of avoiding problems that can creep up later.
To get started in creating any prenuptial agreement, it is important that you lay out all of your finances, assets and debts, before marriage. This gives your fiancée a full and accurate picture of your financial present and possible future, and opens up the necessary discussion of your business interests. Note that if you leave out any assets or debts, even by accident, the agreement will be void.
Once the ball gets rolling, the prenuptial agreement for a business owner should address the following concerns that will be key considerations if the owner gets divorced:
- Availability and access to records of the business (profits and losses)
- Valuation of the business and its assets
- The interest of the non-owner spouse, if any, in the business
- Payout to the spouse should the owner die or want to leave the business and the obligations, if any, to the remaining owners
- Whether a “buy out” agreement is triggered in the event of an owner leaving
- What the terms and payout of any
Remember that a court will not enforce an “unconscionable” agreement that offends the judge's sensibilities and sense of fairness. This goes to the terms of the agreement itself as well as the circumstances under which it was negotiated and signed, especially when it involves complicated issues like the distribution of a business. You need to understand your legal rights and responsibilities before you enter into what could easily be the most important financial negotiation of your life.