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Important issues for a business owner to address in a prenup

| Apr 30, 2020 | Blog, Divorce

A prenuptial agreement can provide significant peace of mind to a Georgia business owner before getting married. The negotiation of the contract’s terms provides the couple with an opportunity to work how to value a business and divide its value if the marriage ends in divorce. The prenuptial agreement essentially builds a plan for resolving the issues that normally arise during divorces that involve business assets.

For people who have existing businesses prior to getting married, they may wish to establish the business at its current value as a non-marital asset. When this is done, the business owner segregates existing value at the date of marriage from the future depreciation or appreciation that may occur after marriage. If a business gains value after the marriage, then that gain might be subject to property division in a divorce but not the initial portion of the business’s value.

A prenuptial agreement should also delve into how a new spouse’s contribution to a business will be treated. The spouse might contribute to the business as an employee or investor. The agreement could spell out that the spouse should receive a fair market salary or establish whether or not marital assets will be used as capital by the business. Alternatively, a spouse may contribute by managing all family affairs so that the business owner can focus exclusively on running the business.

The valuation method for the business represents another common point of contention in a divorce. A prenuptial agreement could alleviate this problem by stating how the valuation will be conducted if it becomes necessary. A family law attorney might provide specific insights to a business owner who needs to make a prenuptial agreement. An attorney may strive to write a contract that complies with the law and protects the client’s business from divorce-related financial losses.