Tuesday, October 22, 2013

L.C.—Laguna Beach Entrepreneur

Over the last week or so news broke that Lauren Conrad is engaged to budding lawyer, William Tell.  I am positive that almost no one reading this post knows who Lauren Conrad is, but to me she will always be the infamous L.C. on Laguna Beach and Lauren on The Hills, and she is now a notable fashion designer and author.  William is touted as a “normal guy” but he is another OC native, successful songwriter, and USC law student.  

Lauren is probably one of the only people to make money as a reality television star (during The Hills she was paid $2.5 million per year) and then successfully branch out into the real world as a successful business woman.  She currently has 8 published novels, a line of clothing, jewelry, and shoes with Kohls department stores, and a line of bedding.

I bring up Lauren for three reasons: (1) I shamelessly loved Laguna Beach and The Hills, and it is nice to see someone with a publicly tragic love life end up happy, (2) she is a young entrepreneurial woman who has turned her fame into a budding empire, and (3) she serves as another reminder of why successful entrepreneurs (or ones who expect to be someday) should consider some thoughtful premarital planning.

If you have business interests that are growing or will be inherited after your marriage, especially if you are active in the growth of that company (you are running the company, you are the face of the company, you supply the ideas of the company, anything like that), you should know that from the date you are married, one-half of that growth belongs to your spouse.  Even more so in a community property state (like California), where from the date you are married half of everything you acquire, including half of appreciation on any assets you brought to the marriage, will belong to your spouse.  Of course, this assumes the business will grow, but the same applies if businesses decline.  In the same way that appreciation belongs to your spouse, debt or other credit obligations can become responsibilities of your spouse and could subject their separate assets to your (or your company’s) debts.  Any personal guaranties or other obligations could become your spouse’s obligations without a marital agreement.  

A marital agreement (prenuptial and postnuptial) could address and opt out of this treatment of premarital business assets, and any other premarital assets, and are a critical tool in an entrepreneur’s toolbox.  If you want to partner in a business with your spouse (I wouldn’t recommend it), draft a good partnership agreement.  Don’t fight this out later in a divorce court; that is ugly for you, the business, and its employees. Remember them?

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