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Prenuptial agreements and protecting a business

On Behalf of | Apr 29, 2020 | Divorce

Virginia residents who are planning on getting married and who own a business might want to consider getting a prenuptial agreement. These are becoming more common, and they can be important in outlining the terms of valuating and dividing the business in case of a divorce.

First, the prenup can establish what the property is worth when the marriage occurs. The spouse may be entitled to a portion of the company’s appreciation in value after the marriage, but this can set aside the previous value as separate property. The prenup can also specify how the business will be valuated if there is a divorce. Valuation can be a time-consuming and expensive process, so determining a method ahead of time can be helpful.

The prenup can also specify the nontitled spouse’s share of the profits and losses from the business. Factors to be taken into account include the person’s participation in the business, the person’s investment in the business and any indirect contributions, such as staying home with children. The prenup should also specify where any needed capital will come from. Finally, the prenup should specify what percentage of the company the nontitled spouse will get in a divorce and how the owner spouse’s income will affect the divorce settlement.

Couples who own a business together may have other considerations. For example, they might decide that they want to sell it. However, this might make it necessary to determine how they will continue running it until it sells. One person might also buy out the other, but this can also cause complications because often the person lacks the liquidity. In this situation, other arrangements might need to be made. Couples may reach a divorce settlement through negotiation or litigation.

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