September 17, 2016

Does A LLC Protect A Business In A Divorce?

(Last Updated On: September 17, 2016)

If I have been working a business by myself, can I form an LLC and have my business protected in case of a divorce?


Are you already married?

If you’re already married, there isn’t a whole lot you can do to protect your assets in case of a future divorce.

Divorce laws differ by state, but generally, you are able to keep what is termed “separate property” in a divorce. Separate property is money obtained prior to the marriage, or by gift or inheritance.

The trick with separate property is if you commingle it with marital property, it can become marital property.

So, if you get a big inheritance after your marriage, and deposit it in a joint checking account with your wife, and both you and your wife are putting money in and taking money out of that account, your inheritance is likely to become marital property.

The same goes with your interest in your LLC–it’s no different than if you buy stock during your marriage. It’s likely to become marital property.

Now, some people form companies and LLCs to fraudulently conceal assets in a divorce, but I’m not going to go down that road.

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