Last updated: January 7, 2023

When a married couple that owns a business or an LLC together decides to divorce, generally, their LLC will be treated as part of the marital estate and divided between the spouses according to their respective interests in the separate property.

However, if one spouse's separate property was used to form or finance the LLC, that spouse may be able to keep the LLC intact, separate from the marital estate.

We've consulted our attorneys, who can help you protect your personal property interests, and shared all their legal advice in this article.

Is My LLC Married or Non-marital?

A woman who owns a non marital LLC

One of the most important decisions you will make when setting up your LLC is whether it will be marital or non-marital. T

his decision determines how separate property obtained by the LLC will be treated in the event of a divorce.

Generally, marital property is divided evenly between spouses in a divorce.

However, if the LLC is marital, any separate property acquired by the LLC will be considered marital property divided evenly between spouses.

Non-marital property and LLCs, on the other hand, are not subject to the same rules. Separate property acquired by a non-marital LLC is considered separate property and will not be divided between spouses in a divorce, unlike marital property.

Which type of LLC should you choose? It depends on your circumstances of separate property division.

For example, suppose there is a possibility that you will be getting a divorce in the future.

In that case, you should probably create a non-marital LLC to protect those separate property assets from being divided evenly between spouses.

In any case, it's important to understand the implications of choosing marital or non-marital status when setting up your LLC.

How Is Marital Property Divided in Tennessee during a Divorce?

One of the first issues that need to be addressed in a divorce is divided marital property. Separate property can include marital assets that couples acquire during marriage and marital debt.

It consists of all real and personal property (or any interest therein), including income and earnings, retirement benefits, insurance policies of various kinds, stocks and investments, and any other separate property type.

In Tennessee, marital property is generally divided equitably between the parties. This does not mean that each party will receive an equal share, but rather that the court will consider several factors to reach a fair result.

These factors include the length of the marriage, each party's income, marital misconduct, whether one party supported the other, and any marital fault.

There is no formula that the court must follow in deciding marital property division. Generally, the separate property division will depend on the unique circumstances of each case.

If the parties are able to reach an agreement concerning separate property division between themselves, their agreement can be presented to the court and will usually be approved, as long as it is fair.

How can I protect my LLC ownership from divorce?

Checking files and pointing at document

If you are the owner of an LLC and are concerned about how a potential divorce could impact your ownership in the company, there are some steps you can take to protect yourself.

Here are a few ideas:

  1. Ensure that the LLC is set up as a marital or separate property entity.
  2. Ensure that marital or separate assets are not commingled.
  3. Make sure you have an agreement for marital support in place in case of divorce.
  4. Make sure to have a buy-sell agreement in place.
  5. Hold marital and non-marital property separate.
  6. Don't commingle marital and personal assets.
  7. Protect your social security benefits.

You can help protect your LLC ownership during a divorce by taking these steps. However, keep in mind that every situation is different, and you should always consult with an attorney to get specific advice for your situation.

For example, suppose there is a possibility that you will be getting a divorce in the future. In that case, you should probably create a non-marital LLC to protect those assets from being divided evenly between spouses.

In any case, it's important to understand the implications of choosing marital or non-marital status when setting up your LLC.

Prenuptial and Postnuptial Agreements

A prenuptial agreement is a contract made by two individuals prior to marriage, where the rights and obligations of each individual pertaining to certain assets are laid out.

In divorce cases, these agreements state which spouse will gain what assets as part of the settlement.

Postnuptial agreements are similar to prenuptial agreements but are made after marriage. They can be used to modify or add to the rights and obligations laid out in a prenuptial agreement or address assets not covered in the original agreement.

Both prenuptial and postnuptial agreements can benefit couples who own a business together. In the event of a divorce, a prenuptial or postnuptial agreement can help to ensure that the company will have an equitable division between spouses.


Who Keeps the Business in a Divorce?

In Tennessee, one spouse purchasing the other's interest in a business is one way to avoid potential issues with the division of marital property. This is often considered the most popular method for dealing with private business interests in a divorce. Other methods include negotiating an agreement between the spouses or by court order.

Is Tennessee a 50/50 State for Divorce?

Tennessee is an equitable distribution state, which means that marital property will be divided in a way that the court deems fair after considering all of the circumstances. This does not mean it will necessarily be split down the middle. There are no set rules for how this division should occur, and each case is unique.

Who Will Divide Your Property in Tennessee’s Divorce Law?

Under Tennessee state law, the property will be divided between spouses married in the State of Tennessee.

Property division is one of the most hotly contested issues in a divorce. In some states, this division is usually left to a judge or another person or panel of people who control what will happen with your marital property.

So, What Can You Do to Protect Your LLC From Divorce?

We can not predict the future, so I would always advise you to at least consider having a chat about a prenuptial agreement with your future spouse.

If you are already married and you haven’t signed a prenuptial, it is still not too late to form an agreement. Especially if you plan to start an LLC together.

Have a heart-to-heart conversation with your spouse and decide if you’d like to address your assets in a postnuptial agreement.

If you need help with outlining your wishes on paper, contact a lawyer to help you. This way, in case of a divorce, you have a guarantee that your joint business assets are divided fairly.

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