A business is sometimes the family’s largest financial asset, and also the most complex to divide. Without a property agreement, a business built during the marriage may be included in the balancing of resources, and even the increase in value of a business founded before the wedding can become a disputed question. A prenup allows you to decide in advance how the business will be treated.
What questions arise about a business?
- Ownership: whether the shares or the business remain with the partner who founded them.
- Increase in value: if the business was founded before the marriage and grew during it, whether the increase in value is shared.
- Salary versus profits: salary paid into the family account is different from profits retained in the company. The agreement should distinguish between them.
- Loans and guarantees: whether the other spouse signed as a guarantor for the business’s debts, and what happens to such a debt on separation.
- A spouse who works in the business: if both spouses work in the business, each one’s status should be defined.
Career assets and goodwill
Israeli case law has also addressed intangible assets, such as professional goodwill or earning capacity built with the other spouse’s support. A property agreement can address these too, preventing a future dispute that is very hard to value in money.
Business partners
A founders’ or shareholders’ agreement sometimes includes provisions on what happens to the shares of a partner who divorces. The prenup should be coordinated with these agreements, so that a partner’s spouse does not suddenly become a shareholder.
What to bring to the meeting
- The certificate of incorporation or business registration, and details of the shareholders.
- Recent financial statements, if available.
- A founders’ or partnership agreement.
- Details of loans and personal guarantees.
If you are already married and are only now starting a business, an agreement can also be made after the wedding. See our article on postnuptial agreements in Israel.
Next steps
Every couple comes with different circumstances, so the agreement should be built around yours. At Paz Israel & Co. Law Office we review your assets, your plans for the future and the right approval route with you. To learn more about the process, see our prenuptial agreement lawyer page, or contact us to arrange a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information about Israeli law and is not legal advice or a substitute for reviewing your specific circumstances.