Business owners who are planning to marry often wonder what happens to their ownership stake if the marriage ends. Delaware law recognizes prenuptial agreements as valid contracts that can help shield business assets from marital property division.
How Delaware law treats business ownership in divorce
Delaware follows equitable distribution rules for marital property. Courts divide assets fairly, but not always equally. Under 13 Del. C. § 1513, judges consider factors such as:
- Length of the marriage
- Each spouse’s contributions to marital property
- Each spouse’s income and earning capacity
- Each spouse’s age and health
- Each spouse’s economic circumstances
A business started before marriage is generally separate property. However, marital funds or significant work by the other spouse may increase its value during the marriage. In such cases, the court may divide some of that growth.
Without a prenuptial agreement, a court may award the non-owner spouse a share of the business growth during the marriage. This may require the owner to sell assets or take on debt to buy out the other spouse’s interest.
What a prenuptial agreement can protect
A well-drafted prenuptial agreement may help a business owner keep a company as separate property in a divorce. The result depends on the agreement’s terms and whether the court upholds it. The agreement can also cover future businesses launched during the marriage.
The agreement should name the business and state that its assets, income and growth remain separate property. It can also explain how marital funds used for business expenses will be tracked or repaid. This may help reduce disputes over commingled assets.
Requirements for a valid prenuptial agreement
Under 13 Del. C. § 322 , Delaware law requires both parties to enter a prenuptial agreement voluntarily, without pressure or duress. Each party must fully disclose their assets, debts and income before signing. The terms cannot be unconscionable to either party at the time of signing or enforcement.
Signing the agreement well before the wedding date helps avoid claims of pressure. Both parties should have independent legal counsel review the contract to ensure their respective interests receive proper protection.
Key terms a business owner’s prenuptial agreement should address
Delaware business owners planning to marry can use a prenuptial agreement to protect their company from potential division in divorce. The agreement can define ownership rights, address business growth and help reduce valuation disputes. Starting these discussions well before the wedding can support a stronger agreement. A Delaware family law attorney can help tailor the terms to the business and the owner’s circumstances.
