Going through a divorce in Florida is an emotional and stressful process. If you currently operate a successful LLC, you may wonder how Florida law impacts divorce and your LLC business. Consult with a family law attorney to discuss the consequences of divorce for an LLC. Florida requires division of the marital property at the time of divorce. However, whether your divorce impacts the ownership of your LLC depends on the facts surrounding your marriage. Division of property due to divorce is a complex process that often requires negotiation to resolve issues. Contact a BrewerLong family law attorney to discuss your LLC and divorce.
Different Types of LLCs
There are multiple types of LLCs recognized in Florida. Whether your divorce and LLC ownership impact your estate division does not depend on the type of LLC.
Florida Domestic LLCs
Florida domestic LLCs are simply LLCs formed in the state of Florida. LLCs formed outside the state of Florida may become Florida LLCs through a process of conversion.
Florida Foreign LLCs
Foreign LLCs refer to LLCs formed in an area not governed by Florida law. These LLCs could be LLCs formed in another state or another country. Despite its foreign characterization, a foreign LLC may conduct business in Florida by obtaining a certificate of authority from the Division of Corporation of the Department of State. To obtain a certificate of authority, your LLC must conduct business within the state of Florida.
Florida Professional LLCs
Professional LLCs, or PLLCs, are LLCs created for a specific purpose and certain individuals. In Florida, only people providing licensed professional services may form PLLCs. Licensed professionals include doctors, lawyers, certified public accountants, dentists, and others.
Florida Nonprofit LLCs
A Florida nonprofit LLC is an LLC created for purposes other than earning a profit. Typically, a Florida nonprofit LLC qualifies for exemption under Section 501(c)(3) of the Internal Revenue Code. A Florida nonprofit LLC must satisfy several requirements for the Section 501(c)(3) exemption.
Florida Series LLCs
A series LLC is a unique LLC wherein the articles of formation permit unlimited segregation of membership interests, assets, and operations into independent series. Florida does not permit the formation of series LLCs. However, Florida does recognize if a branch of a series LLC formed in another state transacts business in Florida. By filing a certificate of authority, Florida recognizes the cell as an independent entity in Florida.
How Is an LLC Formed?
Your LLC is formed by filing necessary documents with the State of Florida. In most cases, you will also prepare an operating agreement that governs the LLC’s operations.
Articles of Organization
You need to file your articles of organization with the State of Florida to identify the LLC. The articles of organization include basic information such as the name and address of your business and its registered agent as well as well as a statement of purpose and an authorized signature.
An LLC Operating Agreement provides the structure for the LLC. The agreement outlines the duties and responsibilities of each of the members. It typically also provides information regarding member removal, LLC dissolution, and the appointment and resignation of members.
Every LLC should create an Operating Agreement to provide procedural safeguards and prevent conflict among the LLC members. The Operating Agreement outlines smooth business operations with clear information and procedures to avoid future conflict among members.
How Does Florida Law Divide Property in a Divorce?
Florida is an equitable distribution state for purposes of divorce. Florida defines equitable distribution as the fair division of all property between married parties. Property acquired during the marriage is considered marital property and is fairly divided between the parties. Property acquired before marriage, inherited during the marriage, or excluded by agreement remains separate and is referred to as non-marital property.
Marital property includes property and assets acquired during the marriage regardless of who purchased it or whose name is on it.
Marital property typically includes the following:
- Personal or real property held by the parties;
- Retirement benefits accrued during the union;
- Increase or appreciation in the value of separate assets (in some cases);
- Workers’ compensation, insurance, pension, and social security benefits paid during the marriage; and
- Stock options.
In addition to the above listed items, gifts from one spouse to another during the marriage often identify as marital property.
Florida law excludes non-marital property in the division of the marital estate during a divorce. Non-marital property includes the following:
- Property acquired before marriage,
- Property acquired before or during marriage through inheritance or gift by someone other than the spouse, and
- Income earned by non-marital assets.
Even if your LLC is marital property, it does not mean you must resign yourself to losing your interest in it. An experienced family law attorney at BrewerLong can conduct a careful assessment of all your marital and non-marital property assets to negotiate property division.
Is My LLC Marital or Non-Marital Property?
Your LLC is an asset. Whether it is deemed an asset of the marriage or non-marital property depends on factors such as:
- When you formed the LLC;
- Whether you invested marital assets in the LLC;
- Whether your spouse contributed to the LLC; and
- Any agreements between you and your spouse regarding the LLC.
Even if you formed the LLC before marriage, it can become marital property. For example, if you invested marital funds in the business or if your spouse worked in the business without compensation, a court might decide that the LLC has become a marital asset.
When an LLC and divorce are involved, a lawyer can help you determine the value of your LLC. A business appraisal can provide an accurate value of your LLC. If your LLC is determined to be marital property, it can strengthen your spouse’s negotiating position. However, a divorce does not need to mean the end of your LLC business. Hiring a qualified family law attorney in Florida can help you reach an agreement with your spouse that will preserve the business and your interest.
How Is Property Divided in Florida During a Divorce?
Florida divorce law provides for a fair division of property. Fair may not always mean equal, and division depends on multiple factors, including the following:
- Length of the marriage;
- The economic situation of the parties;
- Whether interruptions to career or education occurred by either spouse;
- Efforts of a spouse to advance the profession or education of the other;
- Contributions to income from either spouse;
- Contributions enhancing the value of marital and non-marital assets from the other spouse; and
- Liabilities incurred by either spouse.
The ease of division of property also influences decisions made by the court. For example, if one spouse owns and operates a business, the court may award the business to that spouse but offset the other spouse’s share of the business by awarding them a greater share of other assets, such as the marital home.
How to Protect My LLC
There are multiple ways to protect your LLC ownership in a divorce.
Prenuptial and Postnuptial Agreements
Before marriage, you and your spouse may have signed a prenuptial agreement. A prenuptial agreement is a contract signed by both parties that carefully identifies each spouse’s property rights in a divorce.
Review your prenuptial agreement with a family law attorney to determine whether there is a clause governing your divorce and LLC business. If the prenuptial agreement provides that the LLC remains your property in the event of a divorce, this may be sufficient to protect your ownership rights in the LLC. There are requirements for the validity of a prenuptial agreement, including:
- The agreement must be in writing,
- The agreement must be signed voluntarily by both parties,
- There must be full disclosure by both parties of all assets,
- The contract cannot be unconscionable, and
- The agreement must be witnessed or notarized.
Prenuptial agreements are an effective way to protect business interests and other interests before marriage.
Postnuptial agreements take place after the marriage and require the same vital elements as a prenuptial agreement. However, postnuptial agreements may be viewed more critically by courts for fairness and unconscionability.
Keep Your LLC Segregated
If you operate an LLC business that you started before you got married, one way to protect your interest in the event of a divorce is to limit your spouse’s involvement in the LLC operations. If your spouse becomes an integral part of the LLC’s daily operations and, through their efforts, helps grow the business, they may demand a percentage interest in the business. Limiting spousal involvement prevents confusion regarding divorce and LLC ownership.
Also be sure to keep LLC funds separate from marital funds. Don’t use LLC funds to pay your bills, and don’t move money from your personal account to the LLC’s account.
In a divorce, you may determine that your LLC business is your main priority. You may not want the family home, cars, or other personal items of value as much. If this is the case, a family law attorney may negotiate the marital estate division in a way that permits you to retain your 100% interest in your LLC in exchange for other assets.
LLC Operating Agreement
Your LLC operating agreement may include an LLC divorce clause. Unlike the other options we’ve discussed, which can help to preserve your interest in the LLC against your spouse, a divorce clause in an operating agreement serves to protect the other members of the LLC.
The operating agreement divorce clause will outline actions the other members can take to prevent your spouse from gaining an interest in the business. For example, it may permit the other LLC members to buy out your membership interest in the LLC for a set sum of money.
Going through a divorce involves many emotions and stresses. Retaining a qualified family law attorney at BrewerLong ensures careful exploration of your options and diligent representation as you navigate the dissolution process. In addition to family law, our firm has extensive experience with business formation, development, and dissolution. This makes us uniquely situated to handle divorces that involve business ownership.
Our firm provides clear guidance through complex legal situations. We prioritize our client experiences by recognizing the complexity of each client’s case. Since 2008, BrewerLong has delivered high-quality legal services characterized by the highest level of professionalism and understanding. Contact us today to discuss your LLC and divorce.