Would you get a prenup to save your business?
Random thought today: say a YE starts a business when they're single, gets married a few years later, and then gets a divorce. What happens to the business? Does it get split just like the rest of the posessions? And if so, would it be in the YE's best interest to make their spouse sign a prenuptual agreement prior to the marriage?
Think about starting a business when you are 25, growing it to the point where you are able to take home a nice salary (say 100k/yr), getting married at 30, and getting divorced at 35. By that point your business is worth over $1 million. How much would it suck if your former partner now owned half? Half of that business that you poured your heart and soul into, much of it before you met. It's bad enough that you are getting divorced, now your business is falling apart too.
I'll admit, I was thinking about myself when the thought popped into my head...but I think that many YE's are single and eventually plan on marrying so I decided to dig a bit further. It should be said that I think this problem applies to any business type - be it a sole proprietorship or some form of corporation (LLC, S-corp, or other) - as long as the individual owns part of the business, it's fair game.
After reading this article and then this one, one is compelled to get a prenup. It is a very real problem that people have, and it's devastating to think about your ex owning 40% or 50% of your business.
One scary scenario that the first article mentions: you get divorced and your spouse gets half of the biz. You agree to a buy out plan in which you pay your ex-spouse half of the value of YOUR business. On top of that, the business is swamped in legal expenses. How much does that suck? So if your business is worth $1 million, you're stuck paying $500k to a bitter ex-spouse, plus legal costs. Ouch.
Personally, despite all of the potential pitfalls, it would still be a tough call. If I'm so in love with someone that I am about to marry them and profess to spend the rest of my life with them, how could I then go against that by planning for the possibility of divorce? It's almost like planning to fail - sort of like if you start a business but spend a ton of time crafting what you're going to do when you fail.
On the other hand, we all know that ~50% of marriages end in divorce (my guess is that it's higher for entrepreneurs but I've got no data to support that, just the opinion that entrepreneurs are more stressed out than normal). I'm sure if you asked those 50% that didn't make it back when they tied the knot, 100% of them would have been confident that they would make it. Right or wrong, things happen, people change, and unfortunately divorce happens.
My gut tells me that I couldn't do it - that it would be cursing the marriage and clearly placing my business ahead of the love of my life - something I probably couldn't do. What about you guys?
Think about starting a business when you are 25, growing it to the point where you are able to take home a nice salary (say 100k/yr), getting married at 30, and getting divorced at 35. By that point your business is worth over $1 million. How much would it suck if your former partner now owned half? Half of that business that you poured your heart and soul into, much of it before you met. It's bad enough that you are getting divorced, now your business is falling apart too.
I'll admit, I was thinking about myself when the thought popped into my head...but I think that many YE's are single and eventually plan on marrying so I decided to dig a bit further. It should be said that I think this problem applies to any business type - be it a sole proprietorship or some form of corporation (LLC, S-corp, or other) - as long as the individual owns part of the business, it's fair game.
After reading this article and then this one, one is compelled to get a prenup. It is a very real problem that people have, and it's devastating to think about your ex owning 40% or 50% of your business.
One scary scenario that the first article mentions: you get divorced and your spouse gets half of the biz. You agree to a buy out plan in which you pay your ex-spouse half of the value of YOUR business. On top of that, the business is swamped in legal expenses. How much does that suck? So if your business is worth $1 million, you're stuck paying $500k to a bitter ex-spouse, plus legal costs. Ouch.
Personally, despite all of the potential pitfalls, it would still be a tough call. If I'm so in love with someone that I am about to marry them and profess to spend the rest of my life with them, how could I then go against that by planning for the possibility of divorce? It's almost like planning to fail - sort of like if you start a business but spend a ton of time crafting what you're going to do when you fail.
On the other hand, we all know that ~50% of marriages end in divorce (my guess is that it's higher for entrepreneurs but I've got no data to support that, just the opinion that entrepreneurs are more stressed out than normal). I'm sure if you asked those 50% that didn't make it back when they tied the knot, 100% of them would have been confident that they would make it. Right or wrong, things happen, people change, and unfortunately divorce happens.
My gut tells me that I couldn't do it - that it would be cursing the marriage and clearly placing my business ahead of the love of my life - something I probably couldn't do. What about you guys?
posted by Adam McFarland at
7/05/2006 08:12:00 PM
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