Passionate | Experienced | Strategic

Why prenups are essential for business owners

On Behalf of | Jun 4, 2024 | Prenuptial Agreements

When you are preparing for marriage, it is not just about planning the perfect wedding—it is also about setting the stage for a secure future with the one you love. If you are bringing significant assets into the marriage, like a business you have worked so hard to build, it is only smart to consider safeguarding those assets before you tie the knot.

One of the most effective steps couples do in this situation is signing a prenuptial agreement. This marital contract is not just a formality; it is a practical move that establishes a clear framework for how you will handle your finances together. But how exactly can a prenup protect your business?

Safeguarding your individual assets

Washington is a “community property” state, which means courts divide assets acquired during a marriage equally in a divorce. If you founded your business before the marriage, it is a separate property under Washington laws.

However, consider this scenario: your spouse assists and contributes ideas to help manage your business, which grows significantly. They can argue that their contributions entitle them to a portion of the business in case of a divorce. A prenup lets you specify that your business remains your separate property from the start, regardless of their contribution. This not only protects the business but also sets clear expectations between you and your spouse.

Protecting both parties from liabilities

A prenup can also outline responsibilities for any debts related to the business. This is particularly important because it ensures that your spouse does not become liable for debts they did not accrue. For instance, you took out a substantial loan to expand your business before getting married. A prenup can establish that this debt is entirely your responsibility. This ensures that your spouse will not be caught off guard by unexpected financial burdens if things do not work out.

While the thought of a prenup may cause some discomfort, its benefits, especially for business owners, are significant. After all, a prenup does not signify a lack of trust or commitment. Think of it as a practical step that protects your hard-earned achievements while fostering a transparent and honest relationship.