Business Owners & Prenups: How to Keep Your Company Separate

Marriage is more than an emotional commitment. While most people get married because they love their partner, marriage is also a legal and financial partnership. If you ultimately get divorced, this can cause hardship when you try to untangle your financial lives.

For business owners, entering a marriage without clear legal protections in place can expose your company to significant risks if your marriage ends in divorce. A thoughtfully drafted prenuptial agreement can safeguard your business. Our Boston prenup attorneys can draft an agreement that defines how your business will be treated if your relationship ends, helping to protect both your company’s future and your financial interests.

Infinity Law Group offers legal advice and representation to clients across a range of Massachusetts family law matters, including prenuptial and postnuptial agreements, divorce, alimony, child custody, and child support. When it comes to prenups, we believe that being proactive before marriage can save you a lot of trouble (and money) in the future. Contact our law firm today to schedule a free consultation with a Boston divorce lawyer.

Why Business Owners Need a Prenup

Massachusetts is an equitable distribution state. This means that in a divorce, a judge will divide a couple’s property and allocate their debts based on what is fair under the circumstances. This does not necessarily mean a 50-50 split.

Unlike many other states, Massachusetts does not distinguish between marital property and separate property when it comes to property division. That means that all property owned by spouses, no matter when or how it was acquired, may be subject to division in a divorce. If you owned a business when you got married, this could potentially put your company at risk of being split with your soon-to-be-ex.

A prenuptial agreement can avoid prolonged litigation, forced sales, financial strain, and disputes over control of your company. A clearly drafted prenup can address key issues, such as:

• Ownership rights: The agreement can identify one spouse as the owner of a business and specify that it is not subject to marital distribution.
• Valuation: The prenup can establish how the business will be appraised.
• Spousal entitlements: A prenup can specify whether the spouse who does not own the business will receive financial compensation or a buyout rather than an ownership stake in the company.
• Control and management: The agreement can ensure that both decision-making authority and operational control remain with the owner.

These agreements can be tailored to the specific type of business at issue. For example, if you own a corporation or an LLC, ownership stakes and share distributions can be defined in the agreement to prevent one spouse from gaining unintended interest in the company. A skilled Boston family law attorney can analyze your business structure and your goals and help you draft an agreement that meets your needs.

A prenuptial agreement can act as a legal shield to preserve the integrity of the business while providing both spouses with financial clarity. If you own a business, you should not take the chance of losing it in a divorce settlement. Instead, you should work with a Boston prenup lawyer to develop a prenuptial agreement that protects your interests.

Is My Prenup Enforceable?

As a general rule, prenuptial agreements are valid in Massachusetts. However, to be enforceable, they must meet certain legal requirements. That is why it is critical that you work with a lawyer for a prenup, rather than using a fill-in-the-blank form that you found online or a “prenup in a box.”

Under Massachusetts law, a prenuptial agreement must be reasonable and fair when initially signed and when it is enforced. A court will take a “second look” at an agreement to make sure that it is still valid at the time of a divorce.

Prenuptial agreements must also be in writing and include a schedule of property. This goes to fairness, as both spouses must have full knowledge of each other’s assets and debts in order to make an informed decision about whether to sign the agreement. A prenup can also only address monetary matters, like property division and child support. It cannot include provisions about child custody or child support, or any “lifestyle” clauses that seek to punish a spouse for things like cheating.

If one spouse challenges a prenup during a divorce, then a judge will look to see if it was reasonable and fair at the time that it was signed. A court will consider:

• Whether both parties signed the prenuptial agreement voluntarily, without coercion or  threats;
• Whether each party had the opportunity to review the agreement, consult with an attorney, and/or negotiate conditions before signing;
• Whether one or both parties had legal representation;
• Whether both parties completely and truthfully disclosed all assets and liabilities to each other.

If it was reasonable and fair at the time of signing, a court will then consider whether it is fair to enforce the agreement. A judge will not uphold a prenuptial agreement if it would leave one spouse “without sufficient property, maintenance, or appropriate employment” to support themselves.

Because of Massachusetts’ strict laws related to prenups, it is vital to have an agreement drafted by a lawyer. If your prenup is invalidated, then your business might be subject to property division in a divorce. We can help you develop a prenuptial agreement that is reasonable and fair to both parties and (most importantly) will be considered valid by a court.

Experienced Family Law Representation for Boston Business Owners

In Massachusetts, even property that you owned prior to marriage (such as a business) can potentially be up for property division in a divorce. If you own a business and are in the midst of wedding plans, it is the perfect time to take a step back and consider a prenup. We can draft an agreement that will protect your company in the event of a divorce.

At Infinity Law Group, we offer proactive, forward-thinking legal advice on Massachusetts family law matters. We are experienced in both drafting and litigating prenuptial and postnuptial agreements, giving us the necessary knowledge to help our clients develop enforceable prenups. To learn more or to schedule a free consultation with a Boston postnup lawyer, give us a call at 617-250-8236 or fill out our online contact form.