Starting Right: Entrepreneurs and Prenuptial Agreements

by | Apr 10, 2023 | Divorce

For some, prenuptial agreements (“prenups”) may have a negative connotation. They are financial contracts that may limit access to a part – perhaps a substantial part – of one party’s assets by the other party. One purpose of a prenup is to provide clear terms regarding the finances of parties should the relationship dissolve in the future. 

Establishing a prenup does not need to be a negative experience. In this article, we present some communication strategies to help overcome any hesitancies you or your spouse may have. We will establish why entering into a comprehensive and legally secure prenup is a good idea, especially for entrepreneurs whose innovations and business legacies may be impacted.

Why should an entrepreneur have a prenuptial agreement?

Entrepreneurs take risks to produce the goods and services they believe society needs and wants. Building a business or industry takes diligent work over many years. Remuneration structures may be complex, and an entrepreneur’s personal net worth may be significantly tied to the value of their business. Entrepreneurs and new business ventures create jobs and stimulate the economic prosperity of their communities through investment.  If such a business should collapse, the effects of that collapse may be significant.

Entrepreneurs may choose to enter into a prenuptial agreement to further the stability of a business.  Prenuptial agreements can help provide predictability in the event of a divorce or legal separation.

What should be included in an entrepreneur’s prenuptial agreement?

Prenuptial agreements may formally delineate what is, or what will be, separate property versus community property marriage between the parties. This may include delineating the character of a business, its profits, losses, assets, and liabilities.  This can apply to businesses owned prior to marriage as well as businesses created during the marriage. This may also include provisions regarding spousal support, the amount to be paid in spousal support, and the duration of spousal support.

How can I talk with my fiancé about writing a prenuptial agreement?

To help overcome some hesitations that you or your fiancé may have about writing a prenuptial agreement, consider the following:

    1. A prenup protects both spouses, not just the entrepreneur. Business liabilities, as well as assets, are covered. A person with no prenuptial agreement may become responsible for a considerable amount of their ex-spouse’s company debts should it fail. A prenup can mitigate that responsibility.
    2. A prenup is not necessarily all-or-nothing. It does not need to completely shut one spouse out of the life of the other spouse’s company, even after a divorce.
    3. A prenup facilitates honest communication about each spouse’s financial positions, expectations, and assumptions. Communicating about finances earlier may prevent a larger problem later.
    4. Negotiating a prenup does not need to be an adversarial experience for the couple. To be legally secure, each party must have their own lawyer to represent them.  Each party’s lawyer will owe a duty of loyalty to the client, which allows each party to discuss any concerns, questions, and goals candidly. Each couple provides a framework based on their unique situation and over-arching goals. The lawyers may negotiate for certain terms and provisions in the prenup.  Once drafted, the couple is provided the documents for review and approval of the final agreement.

Considering a prenuptial agreement? Let’s talk.

At Hoover Krepelka, we have the expertise to help you and your partner create a comprehensive and legally sound prenuptial agreement. Reach out to us today, and we’ll schedule a consultation with you.

Call or click here to connect today
to schedule a consultation (408) 947-7600

*The above is not meant to be legal advice, and every case is different. Feel free to reach out to us at Hoover Krepelka, LLP, if you have any questions. Information contained in this content and website should not be relied on as legal advice. You should consult an attorney for advice on your specific situation. 

Visiting this site or relying on information gleaned from the site does not create an attorney-client relationship. The content on this website is the property of Hoover Krepelka, LLP and may not be used without the written consent thereof.

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