Before you say "I do": keeping your business and marriage separate.

• Author: Smoak, Emily B.
• Position: Legal Brief

"But, where is the love?" This is the question I was asked by an entrepreneur client in response to my suggestion that he consider a prenuptial agreement before getting married. Certainly, it is a question worth asking. How you answer that question depends upon your perspective. If your answer is "I love you darling, but I want to protect my business just in case," there are a few things you can do to reduce your risk of your business becoming (in whole, or in part) a marital asset.

What is Marital Property?

In Utah, "marital property" is defined (in general) as all assets that are acquired during the marriage. If you start a business during the marriage using funds generated during the marriage, the business is marital property. If you own a business before you are married, and operate your business during your marriage, all income, retirement and investment accounts, distributions, monies and equity earned from the business during the course of your marriage is likely to be deemed marital property by a court. Also, if you own a business before you get married, then sell your old business after you marry and start a new business, your new business is (at least partially) marital property.

Prenuptial or Postnuptial Agreements

A prenuptial or postnuptial agreement is a valid, enforceable contract in which your spouse can release any claims that he or she may have to your business interests now, or in the future. Both parties should review the agreement with their own individual attorney. The agreement should not be presented to your spouse on the day of your wedding. It should be reviewed at some appropriate time well before the bride walks down the aisle.

Make sure you have a witness and notary present when signing the documents. The notary will require both parties to declare under oath that all assets of both parties have been declared as part of the agreement, that both parties are of sound mind, are not under duress (or threat), and that both are operating with the advice of an attorney. Make sure to keep a copy of this agreement among your other important papers.

If your business attorney adds language to your shareholder or operating agreements, note that it is not necessarily binding. While you may think that this added language will protect your business from your marital estate, it is only binding when your spouse is a party to the written agreements or contracts.

All in the Family

If your spouse works with you in your business...