How Are LLCs Treated During A Divorce?

One of the most common questions that divorcees have for their attorneys is: What will happen to my business after the divorce is finalized? In truth, it depends on the type of business you own, whether or not it is a shared partnership, and what each individual’s stake in the company is.

In most cases, businesses, like any other asset, become part of the marital estate and subject to equitable distribution. This means that even if a spouse owned the business prior to the marriage, at least some of the business belongs to the marital estate. To unpack this, you have to understand that businesses accrue value. The accrued value that occurs during the marriage is part of the marital estate whereas the value before the marriage belongs to one spouse. If the spouses co-own the business, then this becomes a bit simpler.

How is an LLC treated in a divorce? 

Businesses are generally considered property of the marriage when they are begun during the marriage. In other words, they’re part of the marital estate. Factors that determine whether or not an LLC is considered marital property include:

• When the LLC was created
• Whether you invested marital property in the LLC
• Whether your partner contributed to the LLC
• Agreements related to the LLC

Even if the LLC was created before the marriage, it can be considered part of the marriage if you invested from the marital estate.

LLCs are treated differently from other types of businesses in a divorce. This is because LLCs can have multiple owners although they can also involve a single owner. In most cases, an LLC will be considered marital property if funds from the marital estate were invested in it. In these cases, the LLC could be subject to equitable distribution.

Logistically, a spouse may not want to separate their business in this fashion. In that case, the spouse can buy the other spouse out by offering alimony or other valuable assets as a chit to keep the business whole. Otherwise, stakes in the LLC would be divided equitably among each spouse and ownership of the business could be clouded by multiple owners.

Protecting you LLC in divorce 

Depending on whether or not you invested funds from the marital estate into the LLC, which tends to be likely, the LLC would be subject to equitable distribution. If you began the LLC before the marriage and invested marital funds during the marriage, then the accrued value of the LLC would be considered a part of the marital estate. As mentioned earlier, you can buy out your former partner against a promise of alimony or divesting yourself of other assets. A Tampa, FL divorce lawyer can help protect your interests in a business.

Talk to a Tampa, FL Divorce Lawyer Today 

Faulkner Law Group, PLLC represents the interests of divorcing couples in Tampa, FL. Call our Tampa family lawyers today to schedule an appointment and we can begin addressing your concerns immediately.