Building a business takes more than money. It can require years of work, personal sacrifice and difficult decisions. For some New Jersey business owners, the company may represent a major part of their financial future before they even walk down the aisle.
Marriage does not automatically put a business at risk, but divorce can create concerns about ownership, value and appreciation. A prenuptial agreement can let couples address those questions before they become part of a dispute. Here are three ways a prenup can benefit business owners.
1. It can define what happens to the business
New Jersey follows equitable distribution rules when couples divorce. A court may divide marital property based on several factors rather than simply splitting everything in half. A business that one spouse owned before marriage may remain separate property, but changes in its value during the marriage can raise additional questions.
A prenup can establish how the couple will treat the business and other property if the marriage ends. New Jersey law allows couples to address rights and obligations involving property, including how they will dispose of property after separation or divorce.
2. It can address future business growth
A company may look very different after 10 years of marriage than it did on the wedding day. Revenue may increase, the company may acquire new assets or the owner may invest substantial time into growing it.
A carefully drafted prenup can address how the couple will treat the business and its future appreciation. This can give both spouses a clearer understanding of their financial arrangement before circumstances change.
3. It can reduce uncertainty during a divorce
Business disputes can make a divorce more complicated when spouses disagree about what the company is worth or whether either spouse has an interest in it. A prenup can establish terms before those disagreements develop.
New Jersey law requires a prenup to meet certain conditions, including a written agreement with an attached statement of assets. A court may also examine whether a spouse signed voluntarily and received appropriate financial information and an opportunity to consult independent counsel.
A business owner’s prenup can therefore address more than ownership. It can help the couple establish expectations for the financial issues that could otherwise become contested during divorce.
Planning ahead can make a difference
A prenup cannot predict every change a marriage or business may bring. However, it can give couples an opportunity to discuss important financial issues while they are still planning their future together.
Business owners and those planning to start a business should consider speaking with a New Jersey family law attorney about whether a prenuptial agreement fits their circumstances and how to structure one that meets their needs.
