When you’re dealing with a business that might have taken years, or even generations to build, it’s understandable to want to put safeguards in place in order to protect your business and wealth.
What Wealth Protection Structures Can Be Used For My Business?
The protections available to you depend on your marital status when setting them up.
If you’re already married, in a civil partnership, or engaged there are two options:
- Pre-nuptial agreements are drawn up before marrying your spouse. A pre-nuptial agreement is a document that is drawn up with your partner to clearly define which financial assets belong to you or your partner. Making a formal agreement before marriage can give you the peace of mind through your partnership, having a clear understanding of what each party is entitled to in the unfortunate event of separation
- Post-nuptial agreements work in the same way but are prepared after marriage. There are several reasons you’d want a post-nuptial agreement, for example, a business you’ve set up since getting married has gained success, or you could have inherited, or come into a large amount of money.
Although the family court has the ability to overrule or vary unfair agreements, a properly prepared document entered into with expert legal advice, should carry real weight.
If you’re not married, and not planning on getting married, you can draft a co-habitation or living together agreement. The past few years has seen an increase of couples choosing to live together and not enter into a marriage, however this has the potential to cause legal issues, as co-habitation doesn’t entitle you to the same legal rights as marriage or civil partnership.
As with pre- and post-nuptial agreements, a living together agreement will give you and your partner the chance to set out who owns what, and how it would be divided if you were to separate.
What Else Is Covered In These Types Of Agreement?
Both pre and post-nuptial agreements cover financial assets such as property rights, business assets, investments and other commercial assets. They can be an effective way of pre-empting a dispute, but what is actually covered in a pre- or post-nuptial agreement, and how effective are they at protecting both the physical and non-tangible assets of your business?
- A business can be valued prior to a marriage, allowing you to discuss fairly the portion of business equity available to each party if they separate
- You may decide to set out an agreement on how profits from the business will be handled – this could reflect the content of any shareholders agreement entered into
- Agreements can include a confidentiality clause seeking to protect against potential defamation if things go sour
- Bespoke rules to protect you and your business
If you’re considering arranging an agreement with your spouse-to-be, getting expert advice on the things you should consider is important to ensure both parties are happy with the overall agreement and the law requires certain criteria to be met.
And Why Are They So Important For Business Owners?
Creating an agreement with your partner is the most effective way of understanding each person’s financial responsibilities within your relationship, but what if you’re a business owner? If you’ve taken the time to build up a business, it’s understandable to want to protect it correctly should anything happen later in life.
Taking the time to openly discuss your plans and expectations with your partner can be a constructive step to avoiding potential disputes later on. Although it’s not always an easy thing to raise, business assets and those built up prior to a relationship are not automatically ring fenced in divorce. Communication is key when it comes to protecting your business, so it’s important to ensure you’re covered from all angles to protect your wealth.
Overall it’s important to understand that businesses are more than just bricks and mortar, they are built though blood sweat and tears. Sitting down to have an open and honest discussion with your partner can put your mind at ease that you’re protected.
Our friendly and approachable team can offer support and clear guidance, advising you on what action to take to ensure your wishes are followed and your best interests are looked after. We're one of the UK’s leading law firms, and our specialist teams located across multiple offices has extensive experience with legacy planning and supporting your business.
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