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Prenups can be a key step for business owners

On Behalf of | Oct 15, 2019 | Divorce |

In California, many people hope to achieve their dreams in Silicon Valley by founding the next big tech startup. The right idea and the right investors can propel small companies to billion-dollar valuations, and the state is a hub for advanced tech workers throughout the industry. However, tech startup founders and other business owners have some unique considerations to keep in mind when it comes to their personal relationships. Because California is a community property state, all assets acquired after marriage are assumed to belong equally to both partners, even if one of those assets is one partner’s closely held company.

As a result, a divorce can be devastating not only to the partners’ finances but also to the company’s viability. This means that many startup founders and entrepreneurs are securing prenuptial agreements before they decide to tie the knot, even if their business plans are only in the idea stage. A prenuptial agreement can make clear how both partners agree to have their assets divided in case of a divorce down the line. Prenups are designed to benefit both spouses, not just the wealthier party; both parties should be represented by attorneys during drafting. Prenups are becoming more common as people choose to marry later in life and often combine two high-powered careers.

Even if the spouses are comfortable taking the risk, their investors may not be. Many major investors and venture capital firms want to see prenups or postnuptial agreements in place before they decide to invest in a privately held company. They want reassurance that the firm won’t fall apart in case of a divorce for the founder.

Prenuptial agreements can be valuable for many people who are considering marriage, especially business owners. A family law attorney may help people considering marriage to plan for a prenup that protects their interests fairly.