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Your LLC and options for its division during a divorce

A California divorce that includes significant assets can potentially involve substantial economic losses. This is especially true when one or both spouses own a percentage of a business. If you built a closely-held business during your marriage, you might worry about losing everything if you divorce. However, depending on the structure, you may have a certain amount of asset protection.

According to the California Tax Service Center, a limited liability company combines characteristics of traditional corporations and partnerships. Several factors affect the way you address the business during your divorce, including the formation date. The number of members and type of business might also affect its division during a divorce.

Limited liability company

A limited liability company allows for personal asset protection and provides tax benefits similar to a corporation. An LLC typically has several members. They each have protection and liability equal to their contribution to the entity. Before addressing it in the divorce, you must calculate the value of your portion of the LLC.

Closely-held business

Also known as a family business, this type of entity typically has one or few members. The interests of the entity must come before personal interests. Because it has fewer members than other LLCs, dividing the ownership interests may be easier. Depending on your situation, you might decide that dividing the LLC amongst the members and walking away is the best option. Another option is giving up other property or assets equal to the business interests and keeping your company.

Equitable distribution in a divorce settlement does not mean equal. Understanding your options and the value of your assets can help you decide how to obtain the best settlement agreement for your needs.