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In case of divorce, business owners should consider a prenup

Most Massachusetts couples ending their marriage must endure the process of dividing marital assets, and these typically include property, bank accounts, vehicles, etc. However, some people also have a business to consider during divorce negotiations, which can provide extra challenges. If one or both parties started a business prior to the marriage, they are wise to craft a prenuptial agreement in the event the union dissolves. Without such a document, the business will likely be deemed marital property, and in that case, the court will decide how it is distributed — unless, of course, the parties can come to an agreement between themselves.

Experts recommend several factors to include in a prenup that will help a business owner protect his or her business in the case of divorce. For one, a business owner should determine the value of the business up to the point of marriage, so that this portion will not fall into the category of marital property during a divorce. Also, individuals need to decide how much, if any, their spouse will share in the profits and losses of the business following the date of marriage. Several points should be considered, including how much, directly or indirectly, the nontitled spouse will be contributing to the business, and whether he or she has invested capital in the company.

The document should also include details regarding what percentage of the business the nontitled spouse would be entitled to in a divorce situation. As well, the business owner should include details as to how his or her income will be treated. For example, will the titled owner pay him or herself a market-appropriate salary, or will those funds remain in the business? Such factors will affect the amount of marital property to be divided upon divorce.

While no couple entering marriage wants to think about their union ending in divorce, a prenup can provide both parties peace of mind, especially in the case of business owners. With this legally binding document in place, couples can avoid some of the challenging and invasive parts of the divorce process, should the unthinkable happen. Many Massachusetts couples find an attorney experienced in family law a valuable asset in the process of preparing such a document.

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