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Sometimes we have clients who present at the time of divorce who actually owned a business prior to the marriage. And the importance of that is that in virtually every state, what you bring into the marriage, what we call premarital assets, can be excluded from the assets that are. Are divided in the divorce. So naturally, it becomes very important for that person to try to quantify what portion of that business is not divisible. And so what you’re going to want to do is to try to go back in time to the date of marriage. And the best that you can, try to put a value on your business at that point in time. And then you would take the position that that value is excluded, that value is not part of the division.
Now, that can be challenging if you’re going back many years to try to arrive at a value at a certain point in time. It can be done, but that’s going to be your first order of business. The other thing that you have to consider is, has there been any appreciation in the value of the business over the course of the marriage? That is, did the value that you brought into the marriage increase because you were working in the business, you were making strategic decisions, your sweat equity? It can be certainly argued that if it has, well, then the appreciation on what you brought into the marriage is now a marital asset that would be divided. So you have kind of a mixed bag. So that’s something certainly to be. To be mindful of.
You can enter into an agreement deciding what would happen if you got divorced. That’s what we refer to as a postnup. But if somebody owns a business before they marry, another way to protect your business would be to enter into a prenuptial agreement which clearly identifies that as your premarital property and can further provide that regardless of how long the parties are married, in the event of divorce, that person would get to retain that business.