Why a Husband and Wife Should Not Own The Same Business?
A husband and wife should not own the same business for one (1) major reason: Asset Protection. In today's economy, business owners are filing litigation claims against Defendants and being sued by their vendors and their customers among other people. In many states, a spouse is not responsible for the other spouse's liability concerns. This is not true in community property states such as California. But, in Illinois, a spouse is not liable for their spouse's debts (with some exceptions). Husbands and Wives generally want to each own a equal percentage in the family business. This is a worthy goal, but there are several ways to give husband and wife control without setting up additional liability concerns. First, one spouse could be an employee of the company. If an Limited Liability Corporation (LLC), an LLC can be set up in two major ways. The first way is a member managed LLC, which means that the members or owners run the day to day operations. In this example, each spouse would be an owner or if you follow my recommendation, only one (1) spouse would own your LLC or Corporation. The second way is a manager managed LLC, which is similar to the way a Corporation is structured. Here, the members or owners appoint a manager(s) such as a spouse. In this situation, one spouse could be a member or owner and both spouses could be managers of the LLC. It is generally much harder to prove liability of a manager than a member or owner. Similarly, a corporation is structured where you have shareholders and the shareholders appoint or elect a board of directors. For example, a corporation could be owned by one (1) spouse and appoint both spouses as directors of the corporation....President...Vice President. Again, the benefit of only one spouse owning an LLC or Corporation is if there is business failure or a lawsuit, one spouse is safe from lawsuits. Or, I should say safer from lawsuits. This asset protection type may be the difference between bankruptcy and more importantly, a nightmare. Today, business owners and their creditors are suing one another and many business owners are facing adversarial claims in bankruptcy court, which is threatening their ability to file Chapter 7 bankruptcy. If one spouse is immune from the lawsuits, the other spouse can assume key responsibilities for the family finances.
In conclusion, it is vital that a husband and wife should own the same business. During a divorce, a court of law or divorce attorney can treat the business as a marital asset. A marital asset is an asset that is created during the marriage of a husband and wife. Thus, a husband and wife each technically own fifty (50) percent of marital assets. Therefore, in a divorce scenario, whether one spouse technically owns the Corporation or an LLC will not be a big deal because the business is a marital asset.
Sean Robertson is an asset protection attorney that concentrates in business counseling, asset protection, and estate planning for business owners and individuals. Sean Robertson is Managing Partner of Robertson Law Group, LLC and may be reached at (312)-854-7102. Our website is www.RobertsonLawGroup.com.
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