Cohabitation Agreements: Protecting Your Business and Personal Assets

Cohabitation agreements may seem like a sensitive topic but at the heart of any business venture is the need for a legal framework. In fact, what many entrepreneurs forget is that a legal framework is not only essential for protecting your intellectual property, but also for protecting your personal assets. Many entrepreneurs take unusual risks in starting their businesses, where large amounts of capital are at stake. It is vital to ensure that you are protected from unexpected scenarios such as marital issues or personal disputes. For example, without proper legal protection, your spouse may be entitled to a share of your company if you were to pass away unexpectedly. Having a comprehensive cohabitation agreement in Virginia is thus essential to running a successful business.

You may be wondering how a cohabitation agreement is relevant to the state of Virginia. The good news is that Virginia has specific legal frameworks for couples and your business relationships can be affected by these legal frameworks. For example, if you and your business partner decide to live together and want to protect yourselves financially; you would enter into a cohabitation agreement to ensure that the relationship remains fair. As Virginia legal experts point out “Essentially, cohabitation is when an unmarried couple lives in the same home. Cohabitation is a form of partnership, and before deciding to live together, you should discuss plans so that the relationship is fair and equitable. You also have to figure out how to split up your shared expenses.”

It can be difficult making these decisions, but without the proper legal framework you could risk ruining friendships and work relationships. The alternative to this is that you may have to go through a lengthy court process in order to divide an estate between two spouses. If you are a small business owner, a cohabitation agreement might not apply to your business if you are not living with or contracted to anyone. This is where the need for a partnership agreement comes into play. A partnership agreement is useful for businesses with more than one owner. These agreements outline how the business will be managed and how profits will be divided.

To help illustrate this point, a cohabitation agreement is a legal framework that applies to the business owner’s relationship with their spouse. Therefore, if you and your business partner are running a successful bakery business together and decide to live together as a couple; you have to make agreements about how the relationship will work. For example, Virginia legal experts point out that “when you are discussing cohabitation agreements, you are deciding how bills and expenses will be shared. You are also deciding if you will keep separate, joint or a combination of a separate and a joint bank account.” The same logic can be applied to a partnership agreement with your business partner. You need to come to an agreement on how profits will be split, how management responsibilities will be divided and what happens if one partner leaves the company or sells their shares.

The other example of cohabitation agreements being relevant to Virginia law is where you have a rental agreement with your partner. The same rules apply; how will you divide your living expenses? What type of lease agreement have you signed? In closing, regardless of the type of agreement; these documents are vital for anyone looking to start a business. Often business owners dedicate a lot of time, money and emotional effort into their careers. You need to protect yourself and your interests to ensure that your time, money and emotional investment aren’t lost over any fights or quarrels. Most importantly, make sure that you do your due diligence when entering into a new agreement.