What Happens to LLCs after a Divorce?

Divorces can be emotionally and financially challenging, involving assets which were acquired before and during the marriage. When a couple creates a business together, things are even more uncertain.

Limited Liability Companies (LLCs) are popular for establishing and running a business. This business structure offers greater amounts of flexibility than others, but divorces make these businesses vulnerable to challenges that arise. Knowing what happens to your LLC after a divorce is critical for planning and ensuring the survival of your business. Here we review different aspects of divorce and its impact on LLCs.

The Separate Interests of the Business vs. Marital Assets

In general, assets accumulated during the marriage are marital property. They are subject to equitable distribution among the two parties going through a divorce. Having an interest in an LLC adds to the complexities of divorce. Several factors influence whether the LLC is a separate asset or a marital asset:

The Date of Creation

The LLC is a separate asset if it was formed before the marriage. When the business was created during the marriage, it may be considered marital property.

Involvement

The involvement of each spouse in the business’s daily operations and management determines the classification of this asset.

Contributions

Each party’s contributions to the business decide whether it is considered separate property. These contributions apply before and during the marriage.

Agreements

Any existing prenuptial and postnuptial agreements may decide how the interests of the LLC are classified during a divorce. Generally, these agreements are the prevailing factors in classifying the interests of the business.

The divorce attorneys at Wolfe & Stec LTD will help to guide you through these situations. We have decades of experience handling the most complex divorces and will ensure that your interests are protected. Contact us at 630-305-0222 to schedule your free consultation with a skilled divorce attorney.

The Valuation of Interests

After deciding if the property is separate or marital, we assess the value of the business. LLCs are challenging because of the lack of publicly-traded shares and pass-through income. We use several different methods to value the business, including:

Asset Analysis 

Skilled professionals review intangible and tangible assets, including equipment, intellectual property, and real estate.

Income Analysis 

We review the current and expected future income generated by the business.

Expert Analysis

An appraiser focusing on LLCs helps evaluate the business to offer the most accurate assessment.

Market Analysis 

We review the comparable sales and use this method to value the business.

After the business is valued, we review how the interest will be divided among the spouses, including:

Co-ownership

Sometimes, each spouse can maintain their ownership, but they must be able to work together professionally.

Sale of the Business

In those cases where neither party wants to continue in the business, we work to sell it and divide the proceeds.

Buyouts

Another option is for one spouse to purchase the other’s interest in the business. Most of the time, this occurs through structured payments or a lump sum.

Dividing the Profits

In rare situations, both spouses could agree to keep the business and share profits according to their ownership percentages.

Our skilled attorneys will help you throughout this process and advise you on addressing these issues.

Strategies for Protecting the LLC

Divorces create uncertainty for LLCs, and these challenges can impact the business. We use different strategies that will protect the LLC throughout the divorce, including the following:

Non-Compete Clauses

Non-compete clauses prevent the other spouse from starting a competing business that could hurt your interests.

Open Communication

Open communication with customers and suppliers is critical to ensure business continuity.

Employee Retention 

Employee retention is critical to the business’s success during these challenging times. We work to ensure you have clear agreements that protect yourself and your interests.

Continuation Agreements

These detail how the LLC is managed throughout and after the divorce. We focus on maintaining the continuity of business during these times.

LLC Management after the Divorce

Once the divorce is finalized, we adjust the ownership and management structure. We use different strategies for achieving various objectives:

Redefining Roles

The roles and responsibilities in the business will change. Our attorneys clarify these factors to ensure a smooth transition and continuity of the business.

Changes in Ownership

We help to create strategies for dealing with the changes in ownership, such as adding new members and solidifying your interests.

Adjusting Operating Agreements

The operating agreement is adjusted to address the management and ownership changes.

Conflict Resolution

We use various mechanisms to prevent conflicts and address these issues proactively. The odds decrease of these issues adversely impacting your business.

Our team of skilled attorneys will help to guide you through these situations. We have decades of experience working on various divorces and understand the importance of protecting your business.

Why Choose Us?

The attorneys Wolfe & Stec LTD understand your challenges. You worked hard to build your business and want to see it continue. We listen to what you say and offer practical legal advice to guide you through these situations. Working with us offers numerous advantages that will protect your interests.

Knowledge

Our team of attorneys has extensive knowledge of divorces and their impact on LLCs. We use this knowledge to create an effective strategy that protects your interests and ensures that your rights are respected.

Experience

Our team of attorneys has extensive experience working on numerous divorce cases. We understand your challenges and offer effective legal advice to guide you.

Favorable Reviews

We are seasoned attorneys and have favorable reviews from our clients. Our firm was named outstanding attorneys for family law in the Chicago area for two years. We offer personal attention and customized legal advice using our knowledge and experience to make a difference for our clients. We are proud of these results and stand by our track record.

Contact us at 630-305-0222 to schedule your free consultation with a skilled attorney. We will review your situation and discuss how we can make a difference to protect your interests in the LLC.