Protecting Your Rights And Your Future

Points a prenup should address to protect a business

On Behalf of | May 18, 2020 | Divorce

Arkansas business owners who are getting married might want to think about having a prenuptial agreement. These are becoming more common, and they can help protect the company in case of a divorce.

A prenup can establish the value of the business at the time of the marriage as separate property. With this in place, it may only be the appreciation during the marriage that is subject to property division in a potential future divorce. Since business valuation can be time-consuming and disruptive, the prenup could also establish an easier way to get a more efficient and accurate valuation.

Other factors a prenup can address

The prenup can also specify how much of the business the non-owning spouse would be entitled to in case of divorce. There are a number of factors to take into account. For example, a spouse who worked for the company and was paid market rates may have less of a claim to the business than one who received a salary that was well under market value. Whether the business was funded by marital property should also be considered. Furthermore, if the owner spouse took a smaller salary in order to leave more money in the business, this could have affected shared savings or retirement accounts. The prenup might also address what will happen if there are losses instead of profits.

Enforcing a prenup

A prenup may be challenged sometimes on the grounds that one person was coerced into signing it or did not fully understand the provisions, so it is important to prepare it correctly. If there is a successful challenge or the couple does not have a prenup, they will have to negotiate an agreement for property division or go to court. Some people prefer to first try to reach a settlement with the help of their respective attorneys.