Why is a Prenuptial Agreement a Key Business Protection Tool?

Under New York and Michigan Law, by default, all property is considered marital property. It is the burden of proof of the party claiming that the property is separate property, to prove that it is separate property. Even if the property is clearly separately owned by the titled spouse, the court will order an expert to be hired to value the property to assist the court to determine the value of any equitable distribution that may be awarded. Every business owner should consider a prenuptial agreement an essential ‘insurance policy.’ Both the process and costs of business valuation can cripple a business.

Imagine owning a business for 20 or 30 years and being required to turn over to an expert all financial documents from your files. They need the documents so they can conduct a forensic evaluation to determine whether you hid money or improperly accounted for profits on your tax returns. That would be alot of paper which means alot of billable hours for the forensic evaluator. Imagine turning over documents from the last 3-5 years. That too may be a daunting task.

Having a prenuptial agreement in place shifts the burden to the spouse who does not own the business to prove the property should be martial property. A prenuptial agreement, if done correctly in both procedural execution and substance, is solid evidence that the business is separate property not subject to equitable distribution. That means it would not subject to evaluation by an expert for valuation and you and your employees can continue doing the work that makes your business profitable. At the low end, some experts may charge $5,000 for a small closely held company but when you have more documents in a larger business, expect the rates to skyrocket.

If you are interested in learning more about how a prenuptial agreement can protect you and your business, contact Diana Mohyi Attorney at Law for a consultation.

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