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Prenuptial and postnuptial agreements for entrepreneurs

On Behalf of | Apr 6, 2016 | Divorce

Entrepreneurs in Virginia and around the country sometimes fail to understand how vulnerable their businesses could be in a divorce. A company may appreciate significantly during a marriage, and business owners are often surprised to learn that their former spouses are entitled to a share of this increase in value. Owners who have yet to marry may choose to insulate themselves against this vulnerability by entering into a prenuptial agreement. Married business owners concerned about this exposure may wish to consider a post-nuptial agreement.

Entering into a prenuptial agreement could also protect entrepreneurs from any poor financial decisions made by their spouses. Spouses generally share their debt obligations, and even debt that spouses enter into alone may be shared in a divorce in certain situations. This could leave unprotected assets such as business interests vulnerable to creditors.

To prevent this, prenuptial agreements classify business holdings or other assets as separate or marital property. Any appreciation experienced by property that has been listed as separate would not be divided in a subsequent divorce. Other assets may be classified as marital property in order to offset this concession. This kind of arrangement also protects the interests of employees, vendors and colleagues, and partnership agreements sometimes contain clauses that require unmarried partners to enter into prenuptial agreements before they wed.

Experienced family law attorneys may caution clients that prenuptial agreements may be difficult to enforce if assets were concealed during negotiations or the provisions appear to be unfair or punitive. To reduce the risk of bitter and costly legal disputes, attorneys may suggest that all discussions be conducted openly and transparently. Attorneys may also urge entrepreneurs to keep complete and accurate business and financial records. This will make it easier to prove during property division negotiations that the earning capacity of the business had been well established prior to the marriage.