Owning a business while going through a divorce can call the future of your business into question. California’s community property laws can mean that your business is divided between you and your spouse, but every situation is different. You might be left wondering how an LLC is treated in a divorce in California.
While California’s divorce laws can be complex, a divorce lawyer understands how these laws affect your unique set of circumstances and can help answer your questions.
Deciding How an LLC Is Divided
In California, 5.88 people per 1000 are divorced. As one of the states with some of the lowest divorce rates, California is a community property state, which means that unless there is a prenuptial or postnuptial agreement, property acquired during the marriage is divided equally between both spouses. Property can be classified as:
- Marital property. Assets, property, businesses, or real estate acquired during the marriage.
- Separate property. Assets, property, businesses acquired before marriage, or assets given as gifts or through an inheritance.
The court must look at certain factors to decide which type of property an LLC qualifies for. For an LLC to be seen as marital property, it can meet one or more of the following qualifications:
- The LLC was acquired during the marriage
- The LLC made significant profits during the marriage
- The LLC used marital funds
- LLC funds and marital funds commingled in a joint bank account or something similar
To be considered separate property, the LLC:
- Was acquired before marriage
- Was not funded by the marital funds
In general, the LLC’s qualification to be divided is determined by when it was created and how it was funded.
How to Protect an LLC
One way to protect an LLC from being divided during a divorce is to have a clear prenuptial or postnuptial agreement. Another is to have clear wording in the LLC documentation that defines what happens if there is a divorce.
Keeping personal and business funds separate can also help clear up whether the LLC is marital or separate property. Avoiding the commingling of marital and LLC funds can go a long way in preserving the LLC’s separate property status.
These options to protect your business need to be taken before the divorce, however. If you didn’t get an opportunity to take these proactive steps, consult with a divorce lawyer who can help guide you through how to protect your LLC.
Hire a Divorce Lawyer
Asset division can be a difficult and emotional experience for everyone involved, especially if it applies to your own business. A divorce lawyer has faced many divorce cases just like yours and understands how to support you and can help you navigate the legal issues that can crop up with disputes like this. If you hire a divorce lawyer, your chances of having a successful outcome increase.
Having their guidance through every step of your divorce can give you peace of mind that an experienced lawyer is on your side. A divorce lawyer can help you value your business accurately and protect your business interests.
An experienced divorce lawyer is a fierce negotiator who is also skilled at representing you during mediation and in court. They want to see you succeed as much as you do, so they work hard to make sure your voice is heard.
At Khalaf Law Group, we are passionate about representing our clients with a solid support system and thorough legal knowledge. We want to help you protect your assets, including your LLC, through this divorce.
FAQs
Q: Is an LLC Protected in a Divorce?
A: Whether the LLC is protected in the divorce depends on multiple factors. If the LLC began before the marriage, then it might not be subject to division, but if it began during the marriage or if it made significant profits during the marriage, then it might be classified as an asset that can be divided. Another factor is whether the LLC was in a joint account or if the marital income was used to support the business.
Q: Is My Wife Entitled to Half of My Business if We Divorce in California?
A: In California, your wife might be entitled to half of your business. California is a community property state, which means property and finances are divided 50/50 during a divorce. When the business was acquired and when it grew financially are two factors that affect whether it will be considered a divisible asset. There are multiple complexities that could qualify your business for splitting in the divorce. A divorce lawyer can answer this question in detail for your specific circumstances.
Q: What Assets Cannot Be Split in a Divorce in California?
A: In general, assets that cannot be split during a divorce are separate assets, such as assets acquired before marriage. This also includes items acquired during marriage that were given or inherited by the individual and not the couple. This becomes tricky when assets are placed into a joint bank account. Once a couple separates, anything they acquire is no longer considered community property. To get an answer for your specific assets, speak to a knowledgeable divorce lawyer.
Q: Can Your Ex-Wife Take Your LLC?
A: While your ex-wife cannot take the LLC outright, she might be entitled to half of it due to California’s community property laws. In a divorce, spouses can receive half of their spouse’s business if the business was created or acquired during their marriage or if the business made significant profits during the marriage. It’s important to discuss this with a divorce lawyer who has experience with LLCs to help protect your business.
Contact Khalaf Law Group
At Khalaf Law Group, we have years of experience representing clients who are going through a divorce. We have an in-depth understanding of California’s community property laws and how they apply to LLCs. We can apply that knowledge to your unique circumstances and help you protect your assets.
To find out how we can help you, contact us today to schedule a consultation.
