The rise of the female entrepreneur’s pre-nup

A successful entrepreneur will always be commercially minded, arguably none more so than those successful female entrepreneurs who might have committed even more than their male counterparts. It is that same commercial approach that must extend to private affairs and to protecting a hard-earned business from a potential divorce. In this article, Keystone’s Family specialist, Zoe Bloom, discusses the surge in females initiating prenuptial agreements, in order to protect their assets.

Starting young

Youth entrepreneurship is increasingly a viable option for women. DueDil and Enterprise Nation report the number of under 35’s starting a business has increased by 70% since 2006 and many of those are women. The successful ones will establish their business by their late 20’s when marriage might well be on the horizon. With marriage comes the romantic ideals of wedding fever but female entrepreneurs must look to retain their commercial spirit. There can be no question of risking a hard-earned business successes in the divorce courts. Many entrepreneurs seek to protect or ‘ring-fence’ their business by using prenuptial agreements.

The entrepremum

We are also seeing a growth in the number of ‘entrepremums’; mothers seeking ways of earning income, in order to provide for their children. The ‘entrepremum’ will typically retain most of the childcare and home-making responsibilities while building up the business. If successful, protecting the business from a divorce is essential, particularly where it may have more potential than the employed position of the husband. In these cases a postnuptial agreement is vital.

Protecting your investment

Of course, there is also the question of investment. Most start-up businesses will require a capital injection at one stage or another. The more secure the business investment, the lower the risk to the investor. Consequentially, the entrepreneur with the most secure business can expect the best range of options from potential investors. A nuptial agreement which protects the business can be an effective way of providing comfort to those investors.

The legal lowdown

Nuptial agreements are not yet enforceable. However the weight of case law and policy is now sufficiently strong for family lawyers to feel confident advising that, within certain parameters, they will be binding in the event of a divorce.

On a cost benefit analysis, a nuptial agreement should be viewed as an insurance policy by an entrepreneur. The cost is financial, in terms of the legal fees. But the emotional cost is unlikely to be equally, if not more, unpleasant. The benefit is, hopefully, the avoidance of having the business asset valued and then potentially divided between the divorcing couple. The other benefit is to gain clarification on what actually happens to the business and other family assets, so that there is no uncertainty during the marriage.

The constant risk is that one party will ask the court to ignore the agreement and that the court will entirely agree with them. However, this outcome is fairly extreme. Generally, when asked, the court will usually uphold the agreement but with certain adjustments, in order to ensure fairness – and even this may be a better outcome than the consequence the entrepreneur would have faced without the agreement being implemented in the first place.