Building a company is hard work. Protecting it and protecting the relationship should be deliberate, not accidental. This guide explains why a prenup is standard risk management for founders and owner operators, and how to structure one without legalese.
- The state’s default plan will override your business plan Without a prenup, your marriage follows state default rules on property, debt, and support. For entrepreneurs, that can translate into ownership ambiguity and diligence friction. Practical consequences include:
• Equity reclassification: portions of premarital equity or the increase in value during the marriage may be characterized as marital property in some circumstances. • Intellectual property uncertainty: trademarks, patents, code, course content, domains, creative assets, and data can become contested if creation dates or assignments are unclear. • Financing and exit delays: investors, lenders, and acquirers often request additional representations, warranties, or holdbacks when ownership and economic rights are not clearly separated.
Expert takeaway: a well drafted prenup lets both spouses define property categories and economic rights now, which preserves clean cap tables and avoids expensive renegotiation later.
- Separate business interests can quietly become joint interests Even when a company started before the marriage, day to day decisions can blur the line between separate and marital property. Common risk points include:
* Commingled cash: using joint funds for payroll, advertising, or equipment can support a claim that the business became partly marital. • Uncompensated contribution: a spouse informally helps with operations, marketing, or bookkeeping; later that effort is characterized as value creation for the business. • Personal guarantees: signing a lease or credit line may create arguments about who bears risk and who shares in upside. • Shared tools and accounts: home office usage, joint credit cards, or shared cloud subscriptions make paper trails messy and valuation harder.
Expert takeaway: clarity beats complexity. Document roles, compensation, and IP assignment. Keep business and household finances separate. Maintain a tidy audit trail.
- Disputes become longer, costlier, and more disruptive without a roadmap In a separation, the hard questions arrive all at once: how to value the company, how to treat retained earnings, what portion of growth is separate versus marital, and whether distributions were income or property. The uncertainty drives legal fees, delays, and red flags for lenders and buyers.
Expert takeaway: a prenup reduces unknowns and sets procedures for valuation and payout, which keeps the company fundable and sellable under stress.
What to include in a founder friendly prenup • Ownership and IP: confirm that premarital equity, IP, domains, content libraries, code, and data remain separate unless both spouses agree otherwise in writing. • Growth rules: define how to treat value created during the marriage. Options include keeping growth separate, sharing a defined percentage, or using a hybrid formula tied to revenue or EBITDA. • Valuation method: pre select a method to avoid fights later. Common choices include independent appraisal, a short list of approved valuation firms, a revenue or EBITDA multiple band, or a formula for early stage ventures. • Spousal involvement: if a spouse works in the business, specify role, salary or contractor rate, bonus eligibility, benefits, and IP assignment. Equity should be explicit and subject to vesting if granted. • Distributions and retained earnings: clarify whether distributions are separate or marital and how to treat undistributed profits sitting on the balance sheet. • Debts and guarantees: allocate responsibility for business credit lines, leases, and personal guarantees. • Liquidity and exit events: define what happens on a sale, secondary, earnout, or recapitalization, and outline tax handling and timelines for any settlement. • Dispute resolution: require mediation or arbitration before litigation, which controls cost and protects confidentiality.
How to raise the topic with credibility
- Lead with mutual protection: I want to protect us and the business so stress stays low if life throws curveballs.
- Emphasize fairness: this is about clarity on both sides, not hoarding. We will each have independent counsel.
- Point to operational reality: investors, lenders, and acquirers expect clean ownership records. Clear agreements keep financing and exits smooth.
- Propose a process: start months before the wedding, exchange full financial disclosures, and use a concise term sheet before drafting.
Founder focused FAQ What if my spouse contributes to the company Put it in writing. Use a job description, market rate compensation, IP assignment, and if equity is appropriate, grant it with vesting and a buyback on separation.
What about employer equity such as options or RSUs Define treatment for unvested and vested awards, future grants, and taxes. Simpler rules now prevent arguments later.
We do not have many assets yet. Is a prenup still useful Yes. You are protecting future value, not just current holdings. That includes funding rounds, growth, and potential exits.
Already married A postnup can accomplish similar clarity after the wedding.
The bottom line Avoiding a prenup does not avoid hard choices; it delegates them to a court and creates avoidable friction in diligence. If you want fewer surprises and more control over your company’s trajectory, agree on fair rules now. If timing has passed, pursue a postnup. Choose clarity together.
Disclaimer: This article provides general information only and is not legal advice. Consult a family law attorney in your state and include business counsel for company specific issues.
