Future brides and grooms often avoid the thought of divorce. For business owners, the consequences of divorce often lead to financial strains that can affect future business. Therefore, it is encouraged that engaged couples consider a prenuptial agreement, commonly referred to as a prenup, which is an agreement between future spouses determining each party’s property rights in the event of a divorce. If a divorce does occur, a prenup decides how marital assets are distributed.
Couples decide to initiate prenups for a variety of reasons. It could be to avoid taking on one spouse’s debts, place boundaries on financial rights, or to pass one’s separate property to children from a previous marriage. No matter the reason, prenuptial agreements help each spouse decide how to separate property without the state government’s involvement.
After a divorce, couples without a prenup must discuss how marital assets are distributed. Prenuptial agreements help business owners by preventing the business from becoming marital property in the event of a divorce. Therefore, if a divorce occurs, the owner’s right to the business and its assets are protected.
There are a few steps a business owner should take when considering a prenuptial agreement. First, they should identify the value of the business prior to the marriage. In the event of a divorce, post-marital value might be divided. However, the prenup can avoid the division of the pre-marital value. The pre-marital value will be considered as the business owner’s separate property.
In the agreement, plans should be made on how to handle appreciation and depreciation of the business and profits and losses. For business owners, it is important that the prenup outlines how a spouse will be affected by these profits and losses. Spouses often play a role in the success of a business, and their involvement might decide how appreciation and depreciation is handled.
During a divorce, it is not uncommon for the spouse of a business owner to claim that they did not receive proper compensation for their involvement in the business. To avoid this, business owners are encouraged to identify what the spouse’s role in the business will be prior to the marriage. If they decide to work in the company, business owners have the responsibility to fairly compensate them for their work. If they indirectly help with the success of the business, this should also be taken into consideration.
Prenups should include an identified percentage of the company that the spouse would obtain if a divorce occurs. This is important because it allows the business to avoid becoming a marital asset. Other marital assets, such as shared property, are typically divided evenly. However, identifying a specific percentage that the spouse is entitled will prevent this from occurring.
If you are a business owner looking to protect your assets in the event of a divorce, please consider contacting a Monmouth County prenuptial agreement lawyer at Fox & Melofchik, L.L.C. Our lawyers work closely with clients to represent their best interests in a prenuptial agreement. If you are interested in speaking to one of our lawyers, contact us online or call us at 732-493-9400 for a free consultation.
Located in Eatontown, New Jersey, we proudly serve clients in Monmouth County, Ocean County, Middlesex County, Mercer County, Ocean Township, Fair Haven, Eatontown, Red Bank, Tinton Falls, Shrewsbury, Middletown Township, Wall Township, Sea Girt, and Spring Lake.