October 16, 2020
Prenuptial Agreements and Business Owners
by Andrew Grossman, Esq., Grossman Law Offices
Owners of closely-held businesses have, generally, had quite a rollercoaster ride in 2020. A booming economy at the beginning of the year quickly changed as spring approached. The COVID-19 pandemic wreaked havoc on many businesses, large and small.
Business owners have had to get creative, shift focus, trim their workforce, obtain PPP loans and stay on their toes. For business owners, a prenuptial agreement has always been something to consider. For business owners who are also planning a wedding these days, a prenup is essential.
Prenups, though seemingly unromantic, serve a valuable purpose. The world of divorce is an unpredictable one. Prenups help bring some certainty and predictability into the picture. Under Ohio law, a business owner and operator who gets married might only be able to expect that the value of their business as of the date of the marriage is protected separate property. Increases in the value of that business during the marriage will often be considered marital property, and subject to equal division. A prenup can redefine how the Court should treat the increase in value during the marriage.
For business owners who have seen the value of their businesses decline in 2020, there may be a clear, if long, path toward rebounding and recovering. If a business owner is about to marry and owns a business that was worth $2 million on Dec. 31, 2019 but is now only worth half as much due to COVID (or any other factors), rebuilding the business to its former value could cost the business owner $500,000 if a divorce occurs. A well-drafted prenup can legitimately shield and protect that (and any additional or further) growth that occurs during the marriage.
Of course, the increase in the value of a business is only one of any number of areas to be considered in obtaining a prenup. Predetermining the financial rights and responsibilities in the event of a divorce before the marriage occurs can save significant time, emotional stress and money. Before a business owner (or highly-compensated executive, or anyone who has managed to save and create some wealth prior to getting married) dismisses the idea of getting a prenup as an unromantic buzz-kill, it is always worthwhile to discuss these issues with a lawyer who has extensive experience in drafting and negotiating prenups.