Prenuptial agreements have become increasingly popular in recent years for a number of reasons, and they can be especially beneficial to small business owners in states with community property laws. In states like Arizona, marital property must be divided equally in a divorce even if the marriage involved was a short one. By drafting a prenuptial agreement, couples can decide for themselves how their property will be distributed should they choose to end their marriage.
Prenuptial agreements can include language that puts a value on a business prior to a marriage. This figure would then be considered separate property and not subject to division during divorce negotiations. These documents could also describe how the business will be run and how any profits will be distributed or used. However, prenuptial agreements that are harsh or unfair may be difficult to enforce. Judges could rule that a spouse who stayed home to raise children contributed to a business by freeing the other spouse of these responsibilities and allowing them to concentrate on commercial matters.
In addition to placing a value on a business and establishing how it will be capitalized and run, prenuptial agreements can specify how commercial assets will be divided in a divorce and how the company should be valued if the marriage ends. They can also include provisions that specify how business income will be distributed to the spouses.
Experienced family law attorneys could explain that prenuptial agreements could actually help marriages to endure by providing peace of mind. However, they could also remind their clients that negotiations must be conducted in good faith and any resulting agreement must be entered into willingly. When assets were hidden or duress was involved, the resulting documents could have little legal value as they would be unlikely to withstand the scrutiny of a judge.