New York City is the pinnacle of capitalism in the United States, and being your own boss is as exhilarating as it is stressful. Many of you have kept it in the family and perhaps you are a 2nd generation restaurateur, continuing a family legacy. In whatever phase your family business is, some of your primary goals are likely to be leaving a legacy to your children, and maintaining the strong bonds among your family members for generations. Unfortunately, it is not without its quandaries. Family businesses can quite easily foster boundary issues and perpetuate entanglements of all kinds. That last one includes finances, and the money entanglement aspect of a family business is the central to our topic- if you have a family business- regardless of the size of the company- you need a prenuptial agreement when you, or any member of the business, is married. At NYC Prenup (www.nycprenup.com) we know that your family business is an extension of those close, loving relationships, and you would like to see the business succeed, without it negative affecting healthy family dynamics. Imagine a pizza shop, a restaurant that has been in the family for 5 generations, and was brought here from Italy in 1955 by a couple who have 4 sons. Those sons are all in the family business, and Family Pizza is booming with a few franchises across New York. The four sons are partial owners, and each marries. Their father passed away in 2001 but Mom is still alive, and she likes to be a part of everything. This is her and dad’s legacy, for generations to come, brought here from their motherland, and they never had the intent of sharing it with anyone who isn’t family. She defends that, fiercely.
As you can imagine, there are few things that make Mom more excited, and more anxious, than a MARRIAGE in the family. It is her dream for her sons to find love and get married, delivering bundle after bundle of precious grandchildren. However, it is also her worst nightmare that one of those marriages end in divorce, and an ex-family-member would have a stake in HER family business. No, no, no. That isn’t happening in this family! Mom may not be driven by a savvy fiscal-mindedness she gets from being born into wealth, her grand-daddy’s advice, or her university thesis she completed on Mergers and Acquisitions, but her push to protect the intended structure of the “Family Pizza” yields the same conserative financial decisions nonetheless. Get a prenup, she says. As usual, Mom is right. Here’s why.
Making sure that this business stays in the family is a lot easier said than done. A great reason to get a prenuptial agreement, when you have a stake in a family business, is often not even for the couple signing the prenup. Or at least initially.
Let us explain. Picture Mom, every wedding is a blessing; a joyous occasion where she bakes as much Stromboli as her arthritic hands allow her to roll, is also a reminder of the looming threat that must be avoided in her family at all costs- divorce. With divorce brings not only her priest’s disapproving glance every Sunday but also the panic about what will happen to the shares in Family Pizza. Will Jennifer take it when she leaves Vinnie? Will she take the kids, the house, AND put the restaurant in some sort of peril?
Mom is nervous, and she has good reason to be. When you have parties invested financially and otherwise in a business, every marriage adds another interested party. Another person who wants a say. Another person who wants MONEY. Now when a divorce happens in Mom’s family, it doesn’t only happen to Vinnie and Jennifer, it could potentially- and most likely will- affect everyone with a stake in the family restaurants.
There are two terms that are universal to prenuptial agreements despite the fact that certain aspects change from state to state: 1) Full financial disclosure means FULL (Can’t hide that $5,000 credit card you took out for that vacation with your ex boyfriend!) and 2) It cannot be hurried or coerced, meaning it needs to be done in advance with a reasonable amount of time before the wedding so that it doesn’t appear that one party signed and agreed to anything in distress, haste or under pressure of any sort. The agreement must be made by both parties in no distress, under no duress. So if you have a family business, start talking about the expectation that every member of the family have a prenuptial agreement, even before you’re in a relationship. It is a legal, financial document that ought to be required of everyone who has a stake in the business.
Yes, Jennifer and Vinnie are getting divorced but she doesn’t necessarily have to walk away without any of that business. When they got married, half of Vinnie’s assets and debt became hers, that includes half of his portion of the business. Does Jennifer have the option to stay involved in the family business? To what degree? Does she have the right to be consulted about certain decisions, after the divorce is final, or (sometimes) worse- during the divorce proceedings? Does that mean that every business decision this family makes will require an uncomfortable and embittered meeting with an ex-family member present? To even those ‘loosest knit’ of families, those who are in a family business do not want their decisions being impacted by an ‘outsider’. The appeal of a family business is often the notion that a legacy, beyond simple genetics and recipe cards, is being passed down. Making sure that Jennifer and Vinnie’s potential split is clean, with a predetermined set of terms that is established by cool heads with an unbiased attorney prior to the marriage beginning, will offer peace of mind for everyone.
If you have a family business and are planning on getting married, visit www.nycprenup.com and allow our staff attorneys to create your prenuptial agreement today.
Here’s to keeping the division of assets clean, and family fighting to a minimum! Or, maybe just to keep Mom smiling at the wedding. When your family members are also your business colleagues, get a prenup even before they have to raise the issue, and keep everyone feeling at ease with their (protected) piece of the pie.