A lot of small business owners don’t consider the possibility that they could lose full ownership of that business if they get divorced. That’s often something they don’t worry about if their spouse isn’t involved in the business or even particularly interested in it. Unfortunately, that may not be the case without taking the right proactive legal steps.
The best time to do that is before you marry if you already own a business. A prenuptial agreement can stipulate that the business is solely yours to keep should the marriage end. It can also stipulate that you won’t owe your spouse something else of equivalent value to a share of the business. Your spouse-to-be would need to agree to that.
When to consider a postnuptial agreement
If you married without a prenup, or you didn’t have the business when you married, you can draw up a postnuptial agreement to protect your full interest in the business. A postnup, like a prenup, must be agreed on by both parties and essentially fair to both. Your spouse may ask for their own provisions if they aren’t going to get part of the business.
A postnup is essentially the same thing as a prenup. The only real difference is that it’s put in place after the couple is married. Both prenups and postnups can override Texas’ community property law, which says that the totality of most assets acquired by either or both spouses during the marriage is subject to equal division in divorce.
What about a family business?
If you’re in the line of succession for a family business (whether with siblings or other relatives or alone) when a parent or grandparent retires or dies passes away, you still want to protect your full share of the business even though it may be considered an inheritance. Inheritances are typically protected from property division as long as they aren’t commingled with marital assets.
Whether you’re considering marriage, considering divorce or at any point in between, it’s important to take the appropriate legal steps to ensure that it remains in your hands in divorce. Even if you and your spouse are both involved in the business, it’s wise to determine if and how it will be handled in divorce. Whatever the situation, it’s wise to get experienced legal guidance.