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How An LLC May Be Dealt with In a Divorce

Divorces can be nasty affairs.

So often, divorcing couples go to war against one another regarding child custody, alimony, and dividing marital property. If you operate a Limited Liability Company (LLC), you may be concerned about how your divorce will impact your business.

A Miami divorce attorney can help you navigate the murky waters of dividing complex marital assets like LLC in a divorce so you can protect yourself and your business from financial loss.


How is Marital Property Divided in Florida?

Florida is considered an “equitable distribution” state regarding divorce and splitting up the marital estate. This means that property and assets acquired throughout the marriage are not necessarily split equally down the middle but are instead divided in a fair or “equitable” fashion.

These personal and business assets that each spouse owns are considered marital assets, but only if they were acquired during the marriage:

  • Cash holdings in savings accounts, checking accounts, etc.
  • Real estate, including the family home
  • Valuable belongings, including vehicles, boats, collectibles, and jewelry
  • Stocks, bonds, and mutual funds
  • Retirement accounts and pensions
  • Business ownership

One spouse or both can negotiate the terms of their property division in a marital settlement agreement. Alternatively, the court can make the decisions for them if they cannot agree.


Is an LLC a Marital Asset?

Determining whether your LLC will be considered a marital asset depends on several factors. For example, if the LLC was formed while you were married, chances are it will be regarded as a financial asset and divided between the divorcing spouses.

Additionally, suppose marital funds or assets were invested into your LLC, or your spouse contributed to the family business operations in some vital way. In that case, they may be entitled to a portion of its value.


When is an LLC Company Protected From Divorce?

Typically, any assets or property acquired during a marriage are considered marital property and are subject to equitable distribution.

There are, however, separate properties, assets, and holdings that are regarded as non-marital property, including those that:

  • Were acquired before the couple married
  • Are income earned on assets or holdings acquired before the marriage
  • Were gifted or inherited by someone outside of the marriage
  • Are excluded from property division due to a clause in a prenuptial agreement or postnuptial agreement

As with any asset, if your LLC falls into any of these categories, you may be able to protect it from the property division process during your divorce.


Methods for Dividing an LLC in a Divorce Case

If it’s determined that your LLC is, in fact, a personal or business asset that is included in the marriage’s property, that doesn’t necessarily mean your LLC business is over. You and your family law attorney can employ some methods to keep the business intact.

Examine Any Prenuptial or Postnuptial Agreements

Prenuptial and postnuptial agreements often include clauses that govern how your LLC will be addressed should a divorce occur.

Keep in mind that there are certain factors required for a marital agreement like these to be valid, including:

  • The contract must be in writing and signed voluntarily by both parties
  • Each party must disclose all assets and property fully
  • The signing of the contract must be notarized or signed by witnesses

If you and your spouse signed any marital agreements—whether before or after you said your vows—now is the time to have an experienced lawyer look at these contracts.

Review the Operating Agreement of Your LLC

One part of forming an LLC is creating an LLC Operating Agreement.

This document outlines important structural details of the business, including:

  • Its members
  • Members’ responsibilities
  • The process for appointing members to—and removing them from—the LLC
  • The process for dissolving the LLC

LLC Operating Agreements often include clauses for what should occur if an invested member gets divorced. This helps to protect the business interests of other LLC members and business partners should a member’s ex-spouse gain an ownership interest in the company.

Negotiate Terms that Exclude the LLC From Property Division

If you find that no agreements protect your LLC from divorce proceedings, there’s still one more step you can take to keep it intact and prevent dividing your stake in the business.
Suppose you want to prioritize your LLC when deciding on divorce terms. In that case, you can negotiate a deal that will allow you to keep 100% of your ownership interests in the business by giving up something else—the family home, vehicles, or other assets or by purchasing the other spouse’s interest.


Protect Your LLC During Divorce

Divorce is a complicated process, no matter your circumstances. However, a divorce involving spouses who jointly own a business can add another layer of complexity.

Understanding Florida laws related to marital assets and LLCs can help you better navigate your divorce. Consulting a family law attorney might be one step in that process to further protect your business interests.

Jessica C. Portalatin

Experienced Attorney in the areas of Corporate Law, Trademark Law, Franchise Law, Contract Law and Civil Litigation.

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