does incorporating my business protect it from devorce

by lee
(new york)

If i incorporate my business and sell my tools to the incorpoation does it protect it from divorce?

Answer

Probably not, though it depends by state.

Although your LLC or corporation owns the assets that were formerly in your personal name, you still own shares in the LLC.

You spouse/soon to be ex-spouse, would claim those shares as marital assets, which could be distributed by the court.

Granted, you might be able to structure an LLC such that even though your ex-spouse got half your shares, she could not sell them. However, if your spouse had a good attorney, they wouldn't ask for the shares, but would instead ask for more liquid assets (bank account, cars, etc.) to make up for half the value of your business.

It's said that the most difficult creditor to protect yourself from is an ex-spouse. About the only way to protect yourself is to have non-marital assets which you keep separate during your marriage and never commingle them (though the rules are different in community property states, so be careful).

Separate assets include though acquired prior to marriage, and those received through inheritance.

Divorce is a complicated topic, however, the general rule is that forming an LLC and holding all the shares yourself will not be very helpful for protecting your assets from a future ex-spouse.