If you own an LLC or other business and are contemplating a divorce in Tennessee, you may be concerned about whether your spouse can claim an interest in your company. The answer depends largely on when the business was acquired, how it was funded and operated during the marriage, and whether any increase in its value could be considered as marital property. As these issues are crucial to your financial future, always first consult with an experienced Tennessee divorce attorney to secure the assets to which you are entitled to in a divorce.
Separate Property vs. Marital Property in Tennessee
Generally, separate property includes assets a spouse owned before marriage, as well as certain property received individually (i.e., a gift or inheritance.) Marital property includes property acquired by either spouse during the marriage, regardless of whose name appears on the title.
A business owned before marriage may therefore begin as separate property. However, its distinction can become more complicated if marital funds are invested in the company, the other spouse contributes to its operation or growth, or the business increases in value during the marriage under circumstances recognized by Tennessee law. Tennessee law specifically provides that income from appreciation of separate property may become marital property if both spouses substantially contribute to its growth.
In a Tennessee divorce, all marital property must be distributed between the spouses while separate property remains separate. Tennessee law follows an equitable distribution system rather than community property rules of separation. This does not necessarily mean that everything a spouse owns individually is automatically protected from equitable division. Property classification can depend on many circumstances. As such, it is always best to consult a lawyer when determining property in a marriage.
Is My LLC or Business Safe from My Spouse in a Divorce?
An LLC or business that predates a marriage does not become marital property simply because you are married. Likewise, having only one spouse listed as the LLC owner does not necessarily mean sole property. If the business was created or acquired during the marriage, the ownership interest may be considered marital property. Even when the business existed before the marriage, the court may need to determine whether a portion of its value or appreciation should be included in the marital estate.
Tennessee courts consider numerous relevant factors when determining and dividing marital assets and debts, including each spouse’s contributions and the value of a closely held business. The law also allows the court to use a monetary or property award when dividing a business interest would be impractical or contrary to law.
Does a Prenuptial Agreement Protect a Business?
A valid prenuptial agreement can address how property, including LLC ownership and business interests, will be treated if the marriage ends. Couples who own an LLC or a business before marriage may consider addressing ownership, appreciation, income, and other business-related interests in a properly drafted agreement. The enforceability and legal effect of a prenup depend on Tennessee law and the agreement’s specific terms, so advice from a Tennessee divorce attorney is important when executing a valid prenuptial or post-nuptial agreement.
Talk to a Tennessee Attorney and Protect Your Business During a Divorce
Divorcing when owning an LLC or business can trigger complicated questions about ownership, valuation, and separate property. A Tennessee divorce attorney from J. Ryan Johnson Law can help determine how your LLC may be classified and what business-related issues should be addressed during a divorce.
At J. Ryan Johnson Law, based in Nashville, we help clients throughout Tennessee navigate complex property division matters with skill and compassion. Our firm can assist with identifying marital and separate property, negotiating during mediation and settlement offers, and protecting your rights throughout the entire divorce process. If you are considering divorce and own a business or LLC, seek legal advice as soon as possible. Early legal guidance can help you understand your rights and protect your monetary interests throughout the Tennessee divorce process. Contact J. Ryan Johnson Law to schedule a consultation.
