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Prenuptial agreements for entrepreneurs

On Behalf of | Oct 18, 2019 | Divorce |

A 2016 survey of matrimonial attorneys in Illinois and around the country revealed that prenuptial agreements are becoming far more common. These agreements are often created when wealthy individuals are planning to marry and wish to protect their assets, but they are also becoming popular among entrepreneurs who have ideas that they believe will blossom into thriving businesses. Having a signed prenuptial agreement can also make it easier for entrepreneurs to raise the funds they need to get their commercial ventures off the ground.

This is because venture capitalists and prospective co-founders may be reluctant to invest their time or money into a business venture that could become a contentious asset in property division negotiations should the founder divorce. The fear is that an unqualified individual could find him or herself in a senior position in the company and hamper future growth. When the founder has not signed a prenuptial agreement, venture capitalists or co-founders may insist on a spousal consent form that restricts voting rights when spouses are awarded shares in a divorce.

Prenuptial agreements and spousal consent forms have been popular in Silicon Valley for many years. Google co-founder Sergey Brim retained his stake in the company following a 2015 divorce because of a prenuptial agreement, and Larry Ellison has maintained control of Oracle despite several divorces.

Experienced family law attorneys may recommend revisiting and revising prenuptial agreements when the assets protected include business interests that have appreciated in value significantly. This is because prenuptial agreements are often contested in high-asset divorce cases, and they may not withstand judicial scrutiny if their terms are not essentially fair. Prenuptial agreements could also be difficult to enforce if negotiations were not conducted in good faith, or one of the spouses involved was under duress when they signed the documents.