An LLC is generally treated as marital property in a divorce. This means that it is subject to division between the spouses, just like other marital assets, such as the house, cars, and bank accounts.
Dividing an LLC in a divorce
There are a few different ways to divide an LLC in a divorce. One option is to sell the LLC and divide the proceeds between the spouses. Another option is to have one spouse buy out the other spouse’s interest in the LLC. Finally, the spouses can also agree to continue owning the LLC together, even after the divorce.
Options for dividing an LLC in a divorce
Selling the LLC: If the spouses agree to sell the LLC, they will need to get an appraisal to determine the value of the LLC. Once they have an appraisal, they can negotiate a division of the proceeds.
Buying out the other spouse’s interest: If one spouse wants to buy out the other spouse’s interest in the LLC, they will need to agree on a price. The price should be based on the fair market value of the LLC.
Continuing to own the LLC together: If the spouses agree to continue owning the LLC together, they will need to develop an operating agreement that outlines their rights and responsibilities. The operating agreement should also address how the LLC will be managed and how the profits and losses will be distributed.
Protecting your LLC in a divorce
There are a few things that you can do to protect your LLC in a divorce:
- Get a prenuptial or postnuptial agreement: A prenuptial or postnuptial agreement is a contract that can be used to determine how property will be divided in the event of a divorce. You can use a prenuptial or postnuptial agreement to specify that your LLC will be considered your separate property and will not be subject to division in a divorce.
- Have an operating agreement: An operating agreement is a legal document that outlines the rules and procedures for operating an LLC. An operating agreement can be very helpful in protecting your LLC in a divorce. For example, you can include a buy-sell provision in your operating agreement that requires the remaining owners to purchase your interest in the LLC if you get divorced.
- Keep separate records: It is important to keep separate records for your LLC and your personal finances. This will help to make it clear what is business property and what is personal property.
Conclusion
If you are going through a divorce and you own an LLC, it is important to understand how your LLC will be treated in the divorce process. You should also take steps to protect your LLC in the divorce. If you have any questions about dividing an LLC in a divorce, you should consult with an attorney.