Freedman & Grinshpun, PC
Freedman & Grinshpun, PC
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The value of a postnuptial agreement when starting a company

You want to start a new business. Perhaps you and your spouse have a great idea or maybe you finished school and are ready to start your professional practice. Those who are already married at the time that they start their business are in a vulnerable position.

Their company will typically become marital property that they will have to divide with their spouse if they divorce later. While you likely don’t intend to get divorced, it could be hard to predict what the stress of starting a business will do to your relationship.

Creating a postnuptial agreement before you actually start the company could help protect both you and your spouse from bad outcomes.

Treating the company as separate property can help protect your spouse

Taking the right steps early in the business formation process is crucial to the protection of the business owner and their assets. Starting a separate bank account so that you don’t commingle your household assets with business assets helps protect your marital estate from claims by business creditors.

You can further strengthen that separation of your business from your personal assets by designating the business as separate property in your postnuptial agreement. That way, your spouse will have neither a financial interest in the business nor responsibility for its failures.

Designating the business as your separate property will typically mean that you can keep it without splitting its value with your spouse if you do divorce. You may want to include some kind of valuable consideration for your spouse given that day will waive their interest in the company although you might use income earned during the marriage to start it.

Being clear about your plans can reduce the strain on your marriage

Beyond separating the assets he wants to invest in the company assets from your marital assets, your postnuptial agreement can help by creating shared expectations. If your spouse knows you will allocate a certain amount of money and time for the business, they’re less likely to resent you or what you do to try to grow your company.

Planning ahead to protect both your marriage and your new company with an agreement can be a very wise move by someone about to start a business.