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Prenuptial agreements and protecting a business

May 4, 2020 | Divorce

With the use of prenuptial agreements on the rise, West Virginia business owners may want to consider using one to protect their company in case of a divorce. Creating a prenup gives the couple an opportunity to talk about the role the business will play in their lives.

When a prenup establishes the value of the business at the time of the marriage, it allows that value to be set aside as separate property. Only the appreciation during the marriage will be considered marital property in this case. The prenup can also establish how the business will be valued in case of divorce, which can save time and money in what can often be an invasive and expensive process.

The prenup should also address the non-owning spouse’s relationship to the business and the relationship of the business’s finances to marital funds. For example, it can specify what portion of the company’s value the non-owning spouse should claim in the divorce. In determining this, a few things should be taken into account. Among these are whether the nonowning spouse worked for the business and whether the pay was market rate, whether the spouse stayed home with the children and how that is valued, and if the business was funded through marital property.

There are a number of other issues that should be considered as well. It can be important to prepare the prenup carefully since it can be challenged during the divorce proceeding. It is important that each of the parties is represented by separate counsel and that the agreement is negotiated and signed well in advance of the wedding.