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Using a prenuptial agreement to secure a business

Prenuptial agreements are much more common than they used to be, and Colorado business owners may want to consider one if they are getting married. A prenup can establish the business’s value at the time the marriage takes place, designating that value as separate property. If there is a divorce, property division would then be based only on how much the value has appreciated since the marriage.

The prenup can also specify what percentage of that value goes to the non-owning spouse. There are several things that should be considered in making that determination. For example, if the non-owning spouse works for the company, whether or not that spouse is paid at market rates may affect what percentage that spouse can claim. Owner spouses who have cut their own salaries to put more money into the business may have less in savings as shared property as a result, and this may need to be addressed.

Couples may also want to consider where any needed capital for the business might come from. For example, if it comes out of shared marital property, there may need to be some clarification as to whether this would then make the business itself shared property or if the business would be required to pay the money back.

Without a prenuptial agreement, the couple will either have to go to litigation or reach an agreement through negotiation on how the business will be divided as well as other property. They may also need to make a plan for child custody and support. If the couple owns the business together, their choices are to sell it, keep running it or for one person to buy out the other. These decisions can often be made without going to court. Each person’s attorney might participate in the negotiation.

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