Will A Prenup Protect My Business?

Judgles gavel and balance scales placed on top of three books

In a marriage, both spouses typically have equal rights to assets, which can include businesses owned by either party. Unless there’s a prenup signed that clearly mentions the business is only one spouse’s asset and won’t be divided in the event of a divorce. Without a prenup all assets are divided equally in Canada. 

Understanding Prenups For Business Owners 

A prenup is a legal document that couples sign before they get married, outlining the ownership of their respective assets and how they would be divided in case of a divorce. It’s like a safety net, ensuring that your financial future is secure, no matter what personal changes life may bring.

For business owners, a prenup does more than just protect personal assets; it can secure your business’s future. Without a prenup, your spouse may be entitled to a portion of your business in a divorce, depending on the laws of your province. This means you might have to sell your business or parts of it to meet the divorce terms. 

During a divorce, a prenuptial agreement typically stands firm in court. Yet, its enforceability may come into question if there have been significant changes in the couple’s life circumstances or if it’s found that one spouse did not have a complete understanding of the prenup’s provisions when it was signed.

A prenuptial agreement document

How a Prenup Protects Your Business

A decade ago, the mere mention of a prenup might have led to an argument or disagreement with your future spouse. However, thanks to increased education and awareness, prenups are now viewed in a more positive light. Here’s how a prenup can help you protect your business: 

1. Defines Business as Separate Property

With a prenup you can mention your business as a separate property, meaning it belongs solely to you and not to your marital estate. You must remember that you can only protect the value of a property at the time of marriage and any growth in business in the future is subject to division. 

2. Prevents Operational Interference

By stipulating that your spouse has no claim to the business, a prenup ensures that your spouse cannot interfere in its operations or governance if the marriage ends.

Knowing that your spouse has no claim to the business, you can operate it without their governance. Many people do try to control their spouse’s business as a way to get revenge or make things difficult for them. 

3. Protect Against Unwanted Partners

Without a prenup, you might find yourself in a situation where your ex-spouse becomes a co-owner of your business. You may try to get a business evaluation at the time of divorce but it is highly subjective and often unpredictable.  

Crafting a Solid Prenup

Here is what you can do to craft a foolproof prenup: 

  • Hire An Experienced Legal Counsel: Find an attorney who specializes in prenuptial agreements and understands the intricacies of protecting businesses. Each party should have their own lawyer to ensure the agreement is fair and legally sound.
  • Full Disclosure: Be transparent about your assets and the value of your business. Hiding assets can lead to a prenup being invalidated. Make sure to also include any business debt you have. 
  • Fair and Reasonable: Act smart and create a fair agreement as one that is heavily skewed in favor of one party may be challenged in court.
  • Update Regularly: As it grows, your prenup may need adjustments. Review it regularly with your prenup lawyer and make any amendments right away.

Sterling Law is here to help you protect your business, which you’ve poured your heart and soul into. We provide prenuptial agreement drafting services in Brampton, designed to protect your hard-earned assets. Reach out to us for a free consultation today ( up to 15 minutes only).

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