Does Marriage affect partners in the business?

Dated:

Q: I have run a design agency with my business partner for 15 years. He is getting married shortly and someone mentioned to me that, should he get divorced, his wife would then own his share of the business. Is that true and, if so, is there any way I can manage that risk?

A: You are right to be concerned. If your business partner ended up getting divorced, the 50% stake he owns in your design business would be considered a "matrimonial asset".

Share of business following divorceThat means it would be included along with all other assets to be distributed between the husband and wife as part of a divorce.

In practical terms, a court will do everything possible not to disrupt a business and avoid unnecessary implications for those who are not parties to the divorce - not least because this could have a potentially negative impact on the spouse's ability to make a living.

It is possible to prepare a prenuptial agreement that ring fences the business interest and, in doing so, prevents it from being included on the list of matrimonial assets during the divorce process. Prenups are not legally binding, so the court could still take the value of the business into account and consider it a valuable resource.

However, the business and your interests are better protected if there is a prenup in place and the courts are increasingly taking notice of those that have been properly prepared.

This article was originally published in the FT.




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