As Minnesota business owners may know, divorce may subject one’s business to property division. While there are ways to protect the business in divorce, instituting such measures in a timely fashion may prevent losing a portion of the business. One of the best ways to ensure that both parties keep what they believe is solely theirs is a prenuptial agreement.
A prenuptial agreement allows the soon-to-be spouses to decide how marital assets would be divided in the case of divorce as well as how alimony may be decided. A properly executed prenuptial agreement may override the state’s laws governing property distribution after divorce. It is important to ensure that the prenuptial is structured and signed in a way that prevents future challenges. This includes making certain that the prenuptial is implemented far enough ahead of the wedding to negate an accusation of coercion. Having it notarized or signed in front of a judge may attest to its validity.
If a prenuptial was not signed, certain complexities may arise. For instance, even though the business may have been established before marriage, the value of the business afterward, if it increased, may be considered marital property. If the spouse worked in the business, their contribution may increase their share after divorce.
If the business is a corporation, the owners may implement a plan that requires unmarried shareholders to waive a spouse’s right to inherit shares in the company. If it is a sole proprietorship, the owner may decrease the amount a spouse will receive by paying himself or herself a higher salary during marriage.
A business owner has various options available that may protect their business in the case of a divorce. An attorney may assist in structuring a valid prenuptial agreement ahead of the wedding day. A postnuptial agreement may also be an option.
Source: Inc., “How to Protect Your Business in a Divorce,” Jeff Landers, May 25, 2010