If you own a family business and plan to marry, you may wonder how marriage could affect ownership if you later separate. A prenuptial agreement can help establish how you and your future spouse will treat the business and its value.
Identifying and protecting business ownership
A prenuptial agreement can identify which of you owns the business before marriage. It can also state whether the business will remain separate property or whether the other spouse may receive an interest in it. Clear terms can reduce disputes about ownership, control and business value.
The agreement should describe the business accurately. This may include its legal name, ownership percentages, major assets and existing debts. The couple should also address future businesses or ownership interests acquired during the marriage.
Addressing income and business growth
A business may increase in value after the wedding. The agreement can explain how you and your spouse will treat that growth if you later divorce. It may also address:
- Whether business income will contribute to shared household expenses
- Whether either spouse will receive compensation for working in the business
- How you will treat any new ownership interests acquired during the marriage
- Whether one spouse can claim a share of the business’s increased value
- How you will divide or assign responsibility for business debts and financial obligations
Virginia law allows parties to a premarital agreement to address rights and obligations involving property, including how the parties will manage and control property and how they will treat it upon separation or divorce. The agreement must be in writing and both parties must sign it.
For enforceability, Virginia law also addresses whether the parties entered into the agreement voluntarily and, in certain circumstances, whether the parties exchanged fair and reasonable financial information or expressly waived additional disclosure in writing.
Considering management and succession
A prenuptial agreement can help establish how you and your spouse will treat the business if the marriage ends. It may address ownership and management rights. You should also coordinate the agreement with your company documents, buy-sell agreements and estate plans.
Steps to take before signing a prenuptial agreement
A prenuptial agreement can provide clarity about ownership, income and future business growth. Review the terms carefully, exchange financial information and make sure you enter into the agreement voluntarily.
Early planning can help protect the business while giving both spouses a clear understanding of their financial expectations.
