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Using a prenup to protect a business

On Behalf of | May 5, 2020 | Divorce

Prenuptial agreements used to be relatively rare, but that has changed in recent years. People in Alabama who own a business may want to use a prenup to protect it. In addition to establishing what the business is worth at the time of the marriage, it can also specify how its value will be divided in case of a divorce.

Determining the company’s value before the marriage means the amount to be split can be only its appreciation since then. The couple may also want to agree ahead of time how they will value the business in a divorce since this can be a lengthy, costly process.

There are several factors that might influence how the business will be divided. For example, the non-owning spouse might have worked for the business or might have stayed home to raise the children, freeing up the other spouse to run the company. In the former case, a non-owning spouse who was not paid at market rates could be owed a bigger portion of the business. In the latter case, the prenup can specify how that contribution would be valued.

Some business owners may pay themselves low salaries so they can keep more money in the business. If this affects the couple’s savings, they may need to account for it.

Even if couples have a prenup, if they do get a divorce and they have children, they will need to determine a schedule for child custody. Prenups can address the possibility of spousal support, but they cannot discuss child support or custody. Parents might be able to negotiate an agreement for child custody and support. This can be less stressful than going to court. If they do go to court, a judge will make a decision that is in the best interests of the child.


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