Owners or partners of a tech start-up, a home improvement company, a restaurant, or any other type of business probably understand that their company is one of their greatest achievements. Aside from fulfilling a commonly held American dream, partial or full ownership of one’s own business provides many benefits including the ability to work in a manner that best suits you, run your business as you choose, and the ability to allocate business profits as you may see fit.
Most business owners would do anything necessary to protect the continued viability of their company. In one sense, they are motivated to protect their company due to the intense personal investment involved. However, other reasons such as a desire to protect the job of trusted, long-term employees may also contribute to a business owner’s desire to protect his or her company. Still others are motivated by the practical fear of losing the livelihood they have worked to build.
While most business owners understand the importance of shielding their personal assets from commercial liability and other risks, many business owners and partners fail to appreciate that getting married can affect your stake in a business. Should the marriage fail and the spouses divorce, the company may experience significant uncertainty regarding the owner’s stake in the company. A premarital agreement or prenuptial agreement can frequently address these types of concerns.
Equitable Division of Property During a Divorce Can Throw Business Operations Into Disarray
In Pennsylvania and most states, a divorce proceeding will involve the identification and equitable distribution of marital property. Typically, separate property is exempted from the equitable division, but certain exceptions apply to this rule. However, in general, all property acquired after the marriage is considered marital property and it is subject to equitable, or fair, distribution between the divorcing spouses. Property can be deemed marital property regardless of how it was titled.
Exceptions that can result in property acquired before the marriage being treated as marital property are essential to recognize. For instance, any increase in value of separate property realized during the marriage can also be treated as marital property and subject to equitable distribution. Thus, if an individual’s ownership stake or stock held in a business increases significantly during the marriage, that increase in value is also marital property and subject to equitable distribution.
Prenuptial Agreements can Protect your Business Interests When Facing a Pennsylvania Divorce
While prenuptial agreements are often viewed in a negative light in the popular media due to notions that such agreements aren’t “romantic,” premarital agreements are practical and essential for most entrepreneurs or business-focused individuals. A prenuptial agreement can allow spouses to plan for what will happen if the marriage fails and results in divorce. Because the prenuptial agreement is prepared far in advance of marital tensions or difficulties, parties are typically willing to negotiate in good faith. Essentially, the premarital agreement serves as a contingency plan should the couple decide that they want a divorce.
In most instances, courts in Pennsylvania are willing to enforce prenuptial agreements. However, this general willingness to enforce prenuptial agreements is balanced by a need for full and complete disclosure by both parties negotiating the agreement. While Pennsylvania law considers the fairness or equity of the agreement immaterial to enforceability, a lack of full and accurate disclosure of assets and liabilities can and will result in non-enforcement of the prenup.
Speak with a Pennsylvania Family Law Attorney to Discuss How to Protect Your Business
Overseeing the day-to-day operations of a business requires hard work, determination, and thousands of hours of your time. Protecting this investment into your future and setting ground rules for your marriage can sometimes avoid allowing financial issues from developing into a wedge between the spouses. However, at minimum, a prenuptial agreement can take the uncertainty out of negotiating a marital settlement agreement when divorce becomes inevitable. Furthermore, since the premarital agreement was negotiated in good faith before issues may have made working together difficult or impossible, it is highly likely that the agreement is fair and protects your important business interests.
The Philadelphia family law attorneys of Sadek & Cooper can help business owners in Philadelphia and Pennsylvania negotiate, draft, and execute prenuptial agreements that protect what is important to you. Our lawyers can also help if you are a Pennsylvania business owner seeking a prenuptial agreement. Furthermore, we work to ensure that all reasonable steps are taken to increase the likelihood that the agreement will be enforced by a court. To schedule a confidential consultation at one of our Philadelphia, Bucks, or Delaware county law offices, call 215-995-2543 today.