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Should Business Owners Consider a Prenup?

The common understanding of marriage has undergone some changes as society evolves and the very nature of the relationship between partners moves toward greater understanding and equality. From the earliest days, when women were not considered much more than a form of property, the laws have created a system where, at least in theory, marriage is a 50/50 proposition. However, if a couple ultimately divorces, splitting marital assets in that manner may not be appropriate. This may be especially true in Texas.

As one of a handful of community property states in the country, Texas has established a system in which it is presumed everything earned by either party during marriage is a community property asset that is to be divided equally should the two divorce. For an individual who owned a business prior to marriage, this can create an unintended result. The business may have been considered a separate property asset both prior to the marriage and perhaps after marriage, depending on the facts and circumstances. However, the equity the business built during the marriage would likely be deemed a community asset. As legal experts can explain, a prenuptial agreement can be employed to address this issue before the couple ties the knot, setting the stage for a clearer and easier division of assets during the divorce process.

Initially, any agreement must of course conform to general contract requirements of fairness and proper execution, but can also be tailored to address any relevant issues specific to your situation, such as to:

  • establish a value for the business as of the date of marriage, 
  • determine the character of equity the business builds during marriage (separate or community property), 
  • specify the non-owner spouse’s role in the business (after marriage and after divorce), 
  • facilitate the sale or acquisition of a business,
  • and establish what else the non-owner spouse is entitled to upon divorce.

So in answer to the question: Should business owners consider a prenup?, talking through these issues with your soon-to-be spouse prior to marriage can provide clarity and peace of mind as well as protect your business’ assets, viability, and personal goodwill. 

Property division can be one of the most challenging aspects of divorce, but there are other equally important decisions to be made that will impact both parties’ lives moving forward. A family law attorney can provide counsel on the rights and responsibilities of all involved. Reach out to us at Hargrave Family Law to help you navigate being a business owner preparing for marriage; we’re here to help.