If you own a Limited Liability Company (LLC) and are in the process of splitting from your spouse, you may be worried about what happens to your LLC in a divorce.
In Florida, an LLC is most often considered marital property if it was created during the marriage, which means each spouse carries an ownership interest in the company, regardless of who started the business or whose name is on the company letterhead. This can make it more difficult to split assets during the dissolution process, but not impossible.
What is Marital Property?
Marital property is defined as property that is acquired during the marriage, with money earned during the marriage. It doesn’t matter whose name is on the property’s title or the marital asset. Under state law, Florida is an equitable distribution state, which means marital property is split evenly in the divorce process.
An LLC is usually considered marital property when created during the marriage. When it is, the financial stakes of the company are split evenly between spouses.
An LLC is a marital property if:
- You create the LLC during the marriage
- You invest marital property into the LLC
- Your partner/spouse contributed to the LLC
- You or your partner/spouse worked in or for the LLC
The LLC might not be marital property if you started your business before your marriage. However, if you invested marital property into the business at any point, it could be considered a family business and thus marital property or non-marital property with a marital component. Determining whether your LLC is marital property or non-marital property can get confusing. But an experienced family law attorney can help you sort everything out.
Protect Your LLC in a Divorce
A prenuptial or postnuptial agreement is the only way to protect an existing LLC during a divorce. If you don’t have a prenuptial agreement because you started the company while you were married, you should protect your company with a postnuptial agreement. If you don’t have a prenup or postnup, it could be nearly impossible to protect the financial aspects of the business from being split equitably in divorce court in Florida.
A Limited Liability Company (LLC) is divided equally between spouses, like any other asset during the divorce. The owner of an LLC is a “member,” and the stake of the LLC they own is called a “membership interest” or, sometimes, “ownership interest.” The membership interest is considered personal property. Due to this, a family court can divide an LLC equitably during the divorce process.
If your ex-spouse receives part membership interest in the LLC, it doesn’t necessarily mean they can run the business. Those with membership interests only have rights to the financial distributions of the company. To further protect your LLC, you can write a strong operating agreement to protect your business interests. This agreement can prevent your ex-spouse from becoming an LLC member if the agreement requires a more significant amount of consent before a new member can be admitted to the LLC.
Of course, every divorce, every company, and every situation is different. If you need help protecting your LLC, it’s best to hire an experienced divorce attorney to help you through the process.
FAQ: LLC in a Divorce
Is my spouse entitled to half of my business if we divorce in Florida?
Most likely, yes if the business was created during the marriage. Florida is an equitable distribution state, which means all assets are split equally in a divorce. It is up to the judge to decide what kind of business split is fair and equitable to both parties.
How can I protect myself financially while going through a divorce?
To protect yourself financially during a divorce, you should first consult with an attorney. Hiring an experienced divorce lawyer to guide you through the process and help protect your finances is always the best way of ensuring the best outcome. The next step is to print out copies of your credit reports. That way, you can document where you were financially when the separation occurred, or the divorce started.
How much does a contested divorce cost in Florida?
A contested divorce can cost between $5,000 and $30,000, with an average divorce costing around $13,000 for families. There is no limit to how much a divorce can cost. The more contested or lengthier the process, the more legal bills can pile up. To save money on the divorce, it’s best to try to compromise where you can on the division of assets.
In Florida, an LLC is most often considered marital property, which means each spouse carries an ownership interest in the company, regardless of who started the business or whose name is on the company letterhead. This can make it more difficult to split assets during the dissolution process, but not impossible.
