There are few things as satisfying as starting a business and then nurturing it into a successful, thriving entity. Realizing that a business could be in jeopardy during a divorce is not a thought that most California business owners would like to entertain, but like with business, it is necessary to be forward-thinking when it comes to marriage. The reality is that some marriages end in divorce. As such, it makes sense to protect personal and business interests during property division, which is often best accomplished by creating a prenuptial agreement.
A prenuptial agreement can preserve a person’s interest in his or her business as separate property, even if it grows in value during the marriage. However, to do this, the business must be accurately valued, as on the date of the marriage. That premarital value can then be protected as separate property and not subject to division during divorce. While most assets acquired before marriage do remain separate property, it is possible for certain assets to actually switch to marital property.
A business owner should also be sure to address the future in a prenuptial agreement. For example, will his or her spouse share in any of the losses or profits during the marriage? Outlining how the other person will benefit from the business, as well as his or contributions — either direct or indirect — and capacity to act and make decisions, during marriage can also be helpful.
Furthermore, a California couple can decide what percentage of a business’ value to which the other spouse is entitled. Even if this is the only asset addressed within a prenuptial agreement and the rest of the marital assets are divided equally, the spouse will only receive the value as previously determined. However, if a couple is already taking the time to address a business in a prenup, it is a good idea to include how other assets would be handled during property division.