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Can a prenuptial agreement work for startup founders?

The landscape of the American workforce is changing, as technology fields continue to expand and grow. That has led to a plethora of startups and other ventures in the area of technology, in Colorado and across the nation. These jobs can be very lucrative, especially for the founders and those who are able to get in on the ground floor. When it comes to protecting that wealth from loss due to divorce, a prenuptial agreement may not provide full coverage on its own.

A critical element of a prenup is a full and truthful disclosure of each party's financial standing. In order for a couple to discuss the terms under which wealth would be divided in the event of a divorce, both parties must be fully aware of the scope of family finances. In other words, it is difficult to release one's claim on assets that do not have a firm dollar value.

In terms of startups, many founders are compensated by a diverse mix of assets. They may take stock options in addition to a salary, or defer a larger salary during the first few years of business. In addition, it is very hard to place a value on intellectual property, and startups that are rooted in technology sometimes also include patents and other potential sources of wealth that are hard to properly value.

For those in Colorado who are preparing to wed and who are concerned about drafting the best possible prenuptial agreement, it is important to work with an attorney who is familiar with unconventional business structures. A prenup may be a great place to start, but there may be other financial tools that could add an additional layer of protection. The recent divorce between Facebook and Twitter investor Mark Pincus and his wife provides an excellent example of the risks involved, as she is asking that their prenup be nullified based on the skyrocketing value of his net worth after they were married.

Source: bizjournals.com, "Why Silicon Valley divorces can be especially pricey splits", Gina Hall, April 20, 2017

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