Prenuptial Agreements are Key to the Survival of a Family Business After Divorce
At their best, family-owned businesses provide the U.S. economy with an influx of both tradition and currency owing to a sense of trust established between the family members and the surrounding communities.
However, working alongside family can prove to be difficult at times, especially when the business struggles financially. When this happens the business may need to be dissolved, which can be a complicated process. It can be more complicated where the principle owners are married and then seek to dissolve their marriage, the impact divorce can have upon the business may be severe.
Why You Should Consider a Prenuptial Agreement
The negotiations of a divorce can be a complex enough process in cases where each spouse looks towards a different future and holds conflicting viewpoints. Add in the division of assets where a family-owned business is concerned and things and can become decidedly more complicated.
By signing a prenuptial agreement both parties can decide which assets are considered separate and outside the business, and if the business documents do not address the procedure for handling a dissolution of the business or what happens where partners leave the business due to death or divorce or other event, the prenuptial agreement may be the appropriate time to discuss such possibility and negotiate such terms, thus ensuring that the survival of a family business after divorce remains a top priority.
Steps Involved in Drafting and Executing a Legally Binding Prenup
It is important that each party retains separate legal counsel throughout the duration of drafting and negotiation of the Prenup and that it contains the following elements:
- The agreement must be in writing with careful attention to full disclosure. It must also be executed in a way that does not benefit one party at the expense of the other.
- The agreement must be executed with the express consent of both parties (preferably in front of witness or notary figure).
While this may be a situation where only hindsight can provide an answer, for couples who are considering establishing a family-owned business, the solution is clear: the survival of a family business after divorce can be decided by signing a prenuptial agreement.