These days it seems like everyone has a “side hustle” to earn extra income. These ventures range from raising extra cash via apps to running a full-fledged small business.

A prenuptial or premarital agreement protects each partner when the two are planning to marry. While a prenuptial agreement isn’t necessary for every side hustle, those who have their own small business can benefit from creating such an agreement.

When Your Side Hustle is a Business

Do you need a prenup if you have a side hustle? It depends on what your “side hustle” entails.

Gig Work

Payment from many side hustles is straightforward. Those who drive for Uber, Doordash, and similar companies receive payment electronically. These payments are recorded on a 1099 form for tax purposes. On your annual tax filings, they’re treated as a form of income. Many side hustlers in this category find they have little or nothing to add to their tax forms beyond the 1099 income.

For these people, a prenup may not be necessary. If you don’t treat your 1099 income differently than your other income and you don’t own business assets or debt beyond using your personal vehicle to drive for an app, your prenup may have little or no work to do.

Small Businesses

Other side hustles, however, are full-fledged small businesses. For example, if you sell handcrafted items on Etsy, offer content creation services to small businesses, or are building your own influencer business, you may have a small business – and benefit more from the terms of a prenuptial agreement.

It may be time to consider a prenup to protect your side hustle if:

• You have an LLC or similar organization for your business,
• You maintain separate business accounts to manage assets and debts belonging to the business,
• The business handles most or all of your income each year or has significant earnings or debts, and
• The business owns property separately from your personal property.

If you have questions, speak to an experienced Texas prenuptial agreement lawyer. An attorney can help you determine if a prenup is right to protect your small business.

How a Prenuptial Agreement Protects Both Spouses

A prenuptial agreement is a contract two people make before they marry. Although the couple finalizes the contract before they wed, the terms don’t take force until the marriage occurs.

A prenup typically covers two broad topics:

• Identifying the assets and debts owned by each partner, and
• Stating each partner’s property rights during the marriage and any later divorce.

Some prenuptial agreements may also specify what happens to property if one spouse dies. For example, if both partners have children from prior marriages, the prenuptial agreement may specify that certain property goes to the spouse’s children if that spouse dies, instead of staying in the marital estate.

When one or both partners have a small business side hustle, a prenuptial agreement can:

• Clarify whether and to what extent each small business is the separate property of each spouse,
• Define the assets and debts that are the responsibility of each spouse, so that one spouse doesn’t end up paying the other’s business debts or accessing the other’s assets,
• Ensure that if a divorce occurs, each spouse can keep their respective business and its proceeds, and
• If one spouse dies, provide guidelines for allowing the other spouse (or a third party) to wrap up the small business, pay any outstanding business debts, and distribute any remaining assets. The prenup can also allow for the surviving spouse to take over the small business if the partners wish.

A prenuptial agreement can also clarify financial rights and settle arguments early in the process. Many partners find that the effort of creating a prenuptial agreement strengthens their new marriage. They have taken the time to have honest conversations about potentially divisive topics – and come out in agreement about their shared future.

What Happens If We Skip the Prenup?

If you don’t have a premarital agreement, you can make a postmarital agreement after marriage. Postmarital agreements cover the same topics – they’re simply made after marriage instead of before marriage.

If a divorcing couple has neither a pre- nor a post-marital agreement, Texas law will determine how property is divided.

Texas is a “community property” state. Under Texas law, property the couple acquires during a marriage is considered the property of both spouses, subject to division in divorce. “Separate property” is not divided in a divorce. If the spouses can’t agree on what items are separate property, one spouse must prove in court that the property is separate – which can be challenging.

To learn more about how a prenuptial agreement can protect your side hustle, speak to an experienced Texas family law attorney today.