How a Postnuptial Can Protect Your Family Business

By Sheryl Rentz on December 3, 2020

Marriage brings a lot of changes to your life. You may have children, move to a new home, and change your lifestyle over time. All throughout, you hope for financial security.

However, if you started a business during your marriage, you may encounter some difficulties down the line, if you were to divorce. Family businesses can be considered marital assets if they were founded after your wedding date and can massively complicate your finances. You may add on new debt, see a drastic change in income, or acquire new property. All of this will be split between you and your spouse if you ever get divorced, which is why you may need to consider drafting a postnuptial agreement.

How Are Business Divided in a Divorce?

To divorce your partner in the state of Pennsylvania, both halves of a marriage must come together and determine who owns each asset, property, and debt that they collected or merged during their marriage. Typically, if a business was started prior to marriage and was only owned by one spouse, then it would be considered separate from household and marital assets. However, if you started it during your marriage, then it may be subject to property division.

Dividing a business in a divorce can be an extremely complicated and costly process. You will have to determine what share of the business you own and how much your spouse is eligible to acquire. This may include everything from real estate to office equipment to social media accounts to digital property like copyright and logos. The more value your business has, the more likely you will have to deal with a complex, high-asset divorce.

Even if your spouse does not have any official title or ownership in the business, they do have a stake in its overall interest due to your marriage. In addition, if you only owned a portion of the company, such as a majority share of stock, or are partnered with other business owners, then your spouse can still have an interest in your share of the company. If you do divorce your spouse, you may have to work closely with financial experts and a family law firm to determine how the business should be divided — or if you can buy out your spouse’s share in it.

That being said, there is a way to avoid this complicated process.

Postnuptial Agreements and Businesses

Prior to getting married, a couple may enter into a premarital agreement that outlines how their things should be divided in the event of a divorce. Some choose to outline how their current assets will be handled as well as any future assets, such as a house, new cars, jewelry, and even businesses. If you had planned on starting a business after getting married, you may have been able to include it in a prenuptial to keep it separate from your household finances.

Even if you did not sign a prenup, you still have the option of drafting a postnuptial agreement. These agreements last from the moment you sign them until the end of your marriage or the death of one spouse. These agreements are designed to speed up the divorce process and ensure that both parties receive a fair share of the marital assets after a divorce. While not as strong and legally binding as a premarital agreement, a postnuptial can perform the same function and protect your business from property division in a divorce.

A postnuptial agreement can also protect your spouse if your business takes on a large amount of debt or declares bankruptcy.

But before you begin drafting such an agreement, you and your spouse should sit down with an experienced Montgomery County family law attorney. If you call the Law Offices of Sheryl R. Rentz, P.C., we can work with you to evaluate all of your marital and business assets so that your agreement is 100% valid under the law. A Pennsylvania judge can ignore a postnuptial during a divorce if she determines that the agreement is unfair, or if one partner hid certain assets from the other. By having your postnuptial reviewed by an experienced and knowledgeable attorney, you may be able to protect your family business from a difficult and costly trial. If you have any questions about drafting a postnuptial or need assistance in a divorce, call the Law Offices of Sheryl R. Rentz, P.C., at (610) 645-0100.