A prenuptial agreement can save the family business after divorce

Family-owned businesses are the backbone of the American economy and the communities they call home. However, a divorce in the family can rock the foundation of these businesses, especially in states with no-fault divorces in place, according to Forbes.

In these states, all property, including the family business, is considered marital property and must be divided equally. But even in states without no-fault divorce systems, the family business can pose many issues in a separation because it is often the most valuable and most illiquid asset in the marriage. It is rare for the business to survive in tact or without a substantial loss in value.

According to Forbes contributor Charley Moore, the best way to save the business is to have a prenuptial agreement in place. This legal document will easily clear up how marital property of shared ownership will be dealt with if a break-up occurs.

The National Federation of Independent Business states that in most cases, a business’s equity is split evenly when a prenuptial agreement is not present, but other considerations will be taken account in the division, such as whether the couple started the business together or if one spouse came on later as an owner.