Reason No. 3: Somebody Owns a Business 

Businesses are really tricky assets. One of the reasons for that is that they are very difficult to value. There is a common misconception that all businesses are valuable because we see and hear about tech companies selling for millions of dollars. But most businesses aren’t like that.  

For example, let’s say that Shannon runs a small law practice whose revenue is $35 a year. Her business doesn’t own any assets other than some office supplies and doesn’t have any inventory. The real value comes from Shannon’s labor – the services she provides to her clients. But a fancy appraiser could come in and say that Shannon’s business is worth $100 because of its reputation, or goodwill, and the revenue it can be expected to produce over time. That theoretically makes sense, but Shannon can’t go to the grocery store and trade that goodwill for food. But if she and Shawna get divorced without a prenup and Shannon wants to keep her business, she will likely have to pay Shawna for part of the value of her business, even though the value is purely theoretical. That would be a very bad outcome for Shannon.  

So that’s one reason that a person who has a business may want to have a prenup – to avoid that very unfair situation. 

Another reason is that a person who owns a business with a partner or multiple stakeholders may want to provide security to their partners or shareholders that, if something happens in their marriage or if they die, their ownership in the business won’t go directly to their spouse.  

For example, if Ricardo has a majority share in a privately-held real estate investment  company, he probably has some rights and responsibilities when it comes to the management and decisions for that company. Ricardo exists in a delicate ecosystem and the other members of that system depend on his shares staying invested in the company for their long-term strategy and goals. For that reason, perhaps Ricardo decides to leave his shares in the company to another shareholder and provides elsewhere in his estate plans for his spouse Ricky. Without a prenup, Ricky could contest Ricardo’s will and try to force a sale of Ricardo’s shares and potentially endanger the position of the company.  

So that’s another of a few different reasons why a person with a business may want to have a prenup. 

Now, there’s obviously a flip side to these examples. For example, let’s say Kyle is a founding member of a small startup when he and Amanda get married and they agree in their prenup that it’ll be Kyle’s separate property. When they get divorced twenty years down the road and Kyle’s shares are now worth $100 million, that would be Kyle’s separate property and Amanda wouldn’t get any of it according to the terms of their prenup. If Amanda helped Kyle and gave up opportunities of her own to support Kyle’s business, not getting any part of that business is a terrible outcome for Amanda. And unfortunately, prenups can’t solve for all possible problems.  

Entering into a prenup has risk, just like anything else. And likewise getting married without a prenup has risk. The best way to look at the prenup is as a tool to solve for the most likely problems. So having a business – whether it’s your primary source of income or a side hustle – can be a really good reason to make a prenup.