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Protecting a business with a prenuptial agreement

| Aug 2, 2019 | Divorce |

Georgia business owners can use a prenuptial agreement to protect their company in case of divorce. The prenup can specify how the business will be valued and what the other future spouse is entitled to.

Establishing a method of valuation can mean it is not necessary to hire a third party and go through the disruptive and expensive process of assessing the company’s value. The prenup should also establish what the business is worth at the time of the marriage. This can allow them to divide only the value that the business has appreciated since the marriage, but the premarital value can still be considered separate property. How much the spouse will share any business profits or losses may be calculated based on several factors, including whether the spouse works for the company and is fairly compensated. Couples may also want to consider how a non-working spouse’s contributions are valued given that they free up the owner to focus more on the business. Another consideration is whether marital funds will be used for the company if required.

This could affect what the spouse is entitled to as could how the owner is paid. Drawing a smaller salary means less money to divide in a divorce. The couple might want to agree on a percentage that the non-owning spouse will receive of the business.

A prenup may address other property as well. For example, it can specify how couples will divide retirement accounts, investments and the home and whether one will pay spousal support to the other. A prenup cannot address child custody or support, so a couple will still have to negotiate this. If they cannot reach an agreement, they may need to turn to a judge. A family law court will make a decision based on the best interests of the child.

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