How a Prenuptial Agreement Protects the Business You Already Own

If you own an interest in a company before you marry, whether you founded it, inherited it or started it with friends, a prenuptial agreement is the tool that truly secures it. And the stakes are not only yours: your business partners are also exposed to risk from your marriage.

Why “it was mine before the wedding” isn’t enough

In New York, property owned before marriage is separate property, but growth in its value during the marriage that results from the owner’s efforts can be treated as marital property. Suppose your company was worth $800,000 when you married and $4 million at divorce. The original stake is yours, but much of the $3.2 million in growth may be subject to division. Without a prenup, what you protect is the value on your wedding day, not what you built afterward.

Using marital earnings to fund the company, paying household bills from business accounts, having your spouse work in the business or adding your spouse as an owner can all weaken your position further.

New York’s formal requirements: no shortcuts

A New York prenuptial agreement must be in writing, signed by both parties, and acknowledged in the manner required for recording a deed. In Matisoff v. Dobi (1997), the Court of Appeals held that an agreement without a proper acknowledgment was unenforceable, even though both spouses admitted they had signed it. In Galetta v. Galetta (2013), a notary certificate missing key language likewise put the agreement in doubt.

Don’t use an online template, and don’t rely on whichever notary is at the bank counter.

The content and the signing process are scrutinized too

Courts review agreements between spouses more closely than ordinary contracts. Common grounds for setting one aside include duress, such as presenting the agreement days before the wedding; incomplete financial disclosure, especially of a business’s value; oral promises that contradict the written terms (Cioffi-Petrakis v. Petrakis, 2013); and one party lacking independent counsel.

Language is especially important for many of our clients. If a spouse with limited English signs an English-only agreement, “I never understood what I signed” becomes a powerful argument later. A professional translation, a translator’s affidavit and independent counsel who speaks that spouse’s language are all essential.

Business interests need specific drafting

A generic template that says “each keeps their separate property” is not enough to protect a company. The agreement should address interests received after a reorganization or sale, growth in value and distributions, the effect of commingling, a spouse’s employment in the business, whether the business can be valued and investigated in a divorce, and inheritance rights at death. The prenup must also be consistent with the company’s shareholders’ or operating agreement. If the two conflict, the other side’s lawyer has a ready-made argument.

Couples who are already married can consider a postnuptial agreement, though courts examine those even more carefully, and the timing and reasons matter.

Attorney’s perspective: how I approach these agreements

When I prepare a prenup for a business owner, I review the shareholders’ agreement, the prenup and the estate plan together. All three must say the same thing, and I often arrange for the spouse to sign the consent required by the shareholders’ agreement at the same time as the prenup.

I pay equally close attention to the signing process. I recommend starting three to six months before the wedding, making sure each side has independent counsel, providing full financial disclosure (ideally with a basis for the company’s value), preparing a professional Chinese translation when one spouse is not a native English speaker, and keeping a complete record of the negotiations. Years later, that record may be what decides whether the agreement stands.

Talk to me

If you are planning to marry and own a business or other significant assets, call +1 718-218-5805 or schedule a consultation. The earlier we start, the stronger the agreement will be.

Series overview

This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. For advice about your situation, please contact us.

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