Written by Michelle N. Ogborne

Should You Include Your Business in Your Prenup?

“You should get a prenup even if you’re young and broke,” said Money magazine in June 2017. It sounds simple enough; you’re in love, you won’t get a divorce – ever – and what you owned before the marriage is yours and what you acquire (including debt) during the marriage is ours, so who needs a prenup? It’s not an easy question to answer. There are a lot of things to consider, especially if one or both of you own a business. We’ll look at why you should include your business in your prenup.

People change. Someday, you may want a divorce, and a divorce can be messy. A prenup addresses some of the problems that may seem minor now, but during a divorce become real issues. For example, you may want to include a social media clause to prevent your ex from bashing you on Facebook®.

When Should You Include Your Business In Your Prenup?

A prenup should always include business information and specifications; in fact, business.com says, “Discussing whether your business should be separate or marital property with your partner may not be romantic, but is absolutely necessary.” Here’s why:

  • Business debts will not impact your spouse.
  • During a valuation, buyout, or both, the value of and financing for your company will not be affected by the possibility of divorce.
  • You protect your spouse if the business goes into bankruptcy or litigation.
  • You protect your business and business partners if your marriage ends in divorce.
  • Without a prenup, even if you started your business before you were married, your spouse is entitled to 50% or more of any appreciation in your company’s value that occurred during your marriage. It could be more depending on the facts of the case.
  • You won’t lose your money – and more importantly, your time – invested in building your business.
  • You avoid directly impacting your employees in the event of a divorce.
  • You maintain control and management of your business.
  • The last thing you want is to end up with an unwanted business partner.

Simply put, it’s not worth the risks to your company, your employees, business partners, and your family. You’ll want to include your business in a prenup for no other reason than to protect your employees and business partners.

It’s Not Too Late for a Prenup

If you didn’t get a prenup before the wedding, you could get a postnup. You can update your postnup as the marriage continues and as you acquire more assets, children, and property. Your postnup can incorporate lifestyle changes that could impact your family during a divorce.

A Prenup Doesn’t Have to Be Difficult

A marital agreement (prenup) is something we feel is an essential part of your new beginning together, especially if you have a business. It may be uncomfortable for you to discuss divorce just as you are embarking on your new life together. But there’s a logic in the old saying, “Plan for the worst. Hope for the best.” A prenup is not only a way of protecting just yourself and your business; it can be a way of protecting your spouse, your future family, and others who depend on you, like employees and business partners.

At Ogborne Law, we want to help you find a better way to live together and to live separately, if necessary, without the stress of an emotional litigation that impacts everyone you love. Call 602.343.1435 or contact us for additional information.

*Approximate number, based on 50% of 1 million increase in valuation and by no means a reference.