Zweig Law, PC Attorneys at Law

Prenups and other ways to protect a business from divorce

A business can represent a significant emotional, financial and time investment for its owner, so protecting it in case of a divorce can be important. One way a business owner in Colorado can do this is with a prenuptial agreement. A prenup that specifies that the business is separate property can mean the intrusive and expensive process of valuing the business for property division purposes can be avoided entirely.

A prenup might also state that the spouse is to receive a certain percentage of the company's value. If both spouses own the business, they may want a prenup that says they will continue to be co-owners if there is a divorce, or they may want it to specify which party will buy out the other. If the couple is already married, a post-nuptial agreement can serve the same purpose.

Some people prefer to use the company's organizing documents to establish that the business cannot be transferred if there is a divorce. It is also important to keep good financial records and to be able to clearly demonstrate that business expenses were kept separate from marital expenses. Funding sources and all transactions, including cash ones, should be documented. Spouses who work for the company should be paid market rates to reduce the likelihood that the spouse can later claim to have contributed to the company's value.

While a prenuptial agreement may cover property, parents will still have to reach an agreement regarding child custody and support if they have children. However, this does not mean that ending up in family law court is inevitable. Many couples are able to successfully negotiate both property division and child custody without turning to litigation. Even if the couple is experiencing conflict, mediation or other alternative dispute resolution methods may help them resolve it and come to an agreement that satisfies them.

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