When you’re married and running a business, things can get tricky. Even if your spouse isn’t actively involved in the day-to-day operations, the business can still be considered part of your marital estate. Without proper planning, what you thought was your business could be divided during a divorce.
As Melinda Previtera explains:
“In a marriage, even if only one person is actively involved in the business, it can still be considered marital property. This is why it’s crucial to plan ahead and protect what you’ve built.”
Let’s dive into how business ownership is treated as marital property, what you can do to protect your business, and why it’s important to plan for the future—whether you’re married or in business with family members.
Key Takeaways
What is Marital Property?
Marital property refers to assets acquired during the marriage, which typically includes businesses started or grown during this time. Even if your spouse doesn’t directly contribute to the business, the law may still consider it a shared asset in the event of divorce.
Melinda explains:
“If you start a business during your marriage, that business is automatically part of your marital estate. So even if your spouse isn’t listed as an owner, they may still have a legal right to part of the business in a divorce.”
Understanding how your business fits into your marital estate is the first step in making sure it’s protected.
Business Ownership During Marriage
Many people assume that if they’re the only person running the business, it belongs solely to them. Unfortunately, that’s not always the case. In marriage, businesses often get lumped in with other assets as part of the marital estate. This is true whether your spouse was involved in the business or not.
Example from Melinda’s Interview: Melinda discussed how in marriage, a spouse could have no formal ties to a business and still have a claim. She used the example of Steve Jobs, explaining how even a large, publicly traded company could be subject to division if one spouse demands a share during divorce. “The spouse could end up with shares or even control in the company, even if they didn’t build it,” she said.
This is why it’s so important to outline ownership, roles, and future outcomes through agreements like prenups or postnups. If you’re married, having these legal protections can stop your business from being automatically classified as marital property.
Expanding Beyond Marriage: Family Business Planning
Business ownership becomes even more complex when family members are involved. If you’re running a family business with your spouse, siblings, or even cousins, it’s crucial to have clear legal agreements in place to avoid future disputes. Unlike in marriage, family members don’t automatically have rights to your business unless they are listed on the business ownership documents.
Melinda pointed out that family trust isn’t enough:
“I’ve seen family businesses torn apart because roles and ownership weren’t clearly defined from the start. Without a legal agreement, things can get messy—especially when one person assumes their role is equal, but legally, they don’t have any ownership.”
For family businesses, especially those started between siblings or parents and children, it’s vital to create an operating agreement that outlines who owns what, who makes decisions, and what happens if someone wants to exit the business. This not only protects the business but also preserves family relationships.
How to Protect Your Business as Marital Property
If you started your business before getting married, it might not automatically be considered marital property—but that doesn’t mean you’re off the hook. A business can still increase in value during the marriage, and that growth could be subject to division during divorce.
There are several ways to protect your business from becoming part of the marital estate:
- Prenuptial Agreement: A prenup, signed before marriage, can define what happens to your business in case of divorce. This is especially important if you’re bringing an existing business into the marriage.
- Postnuptial Agreement: If you’re already married, a postnup can still help. It can outline the division of business assets or ensure that your business remains separate property.
By taking these steps, you’re not just protecting the business—you’re protecting the people involved, too. It ensures that the business can continue to operate smoothly without getting tied up in personal disputes.
Succession Planning and Life Changes
Businesses evolve, and so do families. As your business grows, or as family members get involved, you’ll want to revisit any agreements you’ve made. Melinda highlighted how postnups and other agreements should be updated when there are significant life changes, such as new family members joining the business or a shift in responsibilities.
“Whether your business is growing rapidly or a child is joining the company after finishing school, it’s crucial to review and update your agreements. This kind of long-term planning keeps everyone on the same page and protects the business as it moves forward,” she explained.
Succession planning is another key element to consider. If you plan to pass the business down to your children, or if a family member will take over when you retire, having the right legal documents in place can ensure a smooth transition.
Secure Your Business and Family Relationships
At the end of the day, running a business while navigating family relationships is no small feat. Whether you’re married or working with other family members, it’s crucial to protect your business with the right legal agreements. Prenups and postnups aren’t just about planning for divorce—they’re about setting clear expectations, protecting your assets, and keeping both your business and your family intact.
If you want to secure your business and make sure it thrives regardless of personal changes, now is the time to act. Reach out to a lawyer to explore how a prenuptial or postnuptial agreement can help protect what you’ve built. For more details, visit our lawyer for postnuptial agreements or lawyer for prenuptial agreements pages and get started today.