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How a prenup can protect a business

On Behalf of | Apr 8, 2016 | Firm News

Unmarried people in Texas who own a business and who are thinking about getting married may want to create a prenuptial agreement. As painful as a divorce can be emotionally and as hard as it can be on personal finances, it can be devastating to a business because the other spouse may get half of the value that the business has appreciated during the marriage. In addition to a prenup, it is not uncommon to require that any transfer of shares to a former spouse must have the approval of all shareholders.

Just as important as writing the prenup is creating one that will stand up in court. Therefore, it is important that both spouses have their own attorneys. The spouse who is not the owner should not contribute any time or money to the business, and shared marital assets should not go into it as well.

A prenuptial agreement can cover other issues as well. The parties can spell out that each of them will be responsible for their own debt, and they can also decide ahead of time how they will divide any marital debts in the event of a divorce. Business owners should keep clear financial records that will indicate the worth of the company before and after the divorce.

Many family law attorneys tell their clients that one advantage of such an agreement is that it gives couples a chance to talk about money and how they might handle a divorce. In some cases, that sense of cooperation might lead to an amicable divorce. Couples can also try mediation rather than going straight to litigation. However, in some cases, one spouse might challenge the prenup, or if there is no agreement, there might be conflict about property division. A prenup cannot cover child custody or support, so dealing with these issues may increase the degree of conflict as well.