In the past, the majority of couples did not consider a marital contract an essential part of wedding planning. However, those who own a business may find that a prenuptial agreement deserves careful consideration. Texas residents may find that these contracts can help provide peace of mind if a marriage subsequently ends.
A prenuptial agreement can serve several purposes in relation to a small business. The first is to establish the value of a business at the time that a marriage commences. If the spouse who holds the title of a business can establish the value at the time of marriage, then the premarital worth can be considered separate property and will not be a part of negotiations in the event of a divorce. Likewise, a prenup can dictate how both appreciation and depreciation will be factored into a divorce. It will be helpful if the contract addresses how a spouse’s direct or indirect contributions to the business will be compensated in a divorce.
While it’s important to establish the value of a business at the time of a marriage, it is just as beneficial to agree to a process for arriving at a value for a business at the time of a divorce. Being able to come to an agreement beforehand can reduce the friction and the hassle of going through a third-party professional valuation. An independent valuation process can be disruptive and intrusive to all parties, including employees.
Lastly, a prenuptial agreement can spell out what percentage of a business a spouse is entitled to in the event of a divorce. It can also dictate how the income from a company will be directed. Choosing to roll an appropriate salary back into a business can negatively impact marital property that could be subject to division in a divorce. Texas residents who are considering a prenuptial agreement are best served by consulting with an experienced family law attorney.