What Does A Community Property Interest In A Limited Liability Company (LLC) Get You?

A member’s interest in an LLC may be community property if that interest was acquired during marriage.  However, the member’s right to participate in the management and conduct of the business entity is not community property.

What that means is that if a member in an LLC gets a divorce, the member’s spouse, if any, is only an assignee of the membership interest.  The member’s spouse may be entitled to receive a portion of the economic benefit if there is a distribution, but will have no right of management and control of the business.

If a member in an LLC dies, then the member’s spouse, if any, and an heir, devisee, personal representative, or other successor of the member, may be an assignee of the membership interest.  Again, the member’s spouse (or heir, devisee, personal representative, or other successor of the member) may be entitled to receive a portion of the economic benefit if there is a distribution, but will have no right of management and control.

Also, if the spouse of the member should die, their community interest in the LLC will only serve to transfer an assignment of the membership interest to a non-member heir, devisee, personal representative, or other successor of the member’s spouse.  That non-member heir, devisee, personal representative, or other successor of the member’s spouse will have no right to participate in the management and conduct of the business.

This has no effect on the ability of the members of the LLC to prepare agreements for the purchase or sale of a membership interest at any time.  Often times, buy/sell agreements are prepared to deal with the event of a member’s death or divorce.

So, the member’s interest in the LLC may be community property, but not the member’s right to participate in the management and control of that LLC.


  1. rand

    Do you know if this article applies to California community property with regard to the death of a California LLC member. Does the surviving wife have any right of management and control of the business or does she just receive economic rights?

  2. Michell Bradie

    Since I am not licensed to practice law in California, I am not able to give you an opinion regarding California law. I would recommend that you contact an attorney in that jurisdiction.

  3. Collin

    in a divorce temp order, if both spouces are managing members and own the LLC equally, can the court award the LLC to one spouse and bar the other from accessing the premisses and remove that members right to manage the LLC?

  4. Michell Bradie

    I do not handle divorce cases, so may not be the best person to discuss what courts do with their temporary orders. You should discuss that with your divorce attorney.

    When our office creates LLCs that have multiple members, we include language in the Company Agreement (also known as Regulations or Operating Agreements) to deal with the issues of death, divorce, disability, and disgust (someone just wants out). These are what I call “The 4 Big D’s”. Many times these issues are not covered when folks use on-line services or non-lawyers to create their LLCs for them. So while they may save some money up front in creating their entity, it often costs them far more money down the line in litigation costs.

    Since both of you are managing members of the LLC, I am going to assume that the entity was formed during marriage, making it community property under the laws of Texas. Generally, both managing members have the right of management and control, unless the Company Agreement states otherwise. Upon divorce, the Company Agreement should control what happens, and the Judge will consider the value of the asset in making the just and right division of the property. However, pending the divorce, someone needs to run the business and preserve the value of the asset. If the two of you can’t work together to do that, then the Judge is the likely party to make the decision as to which of you should have the right to temporarily run the business.

    If we use the example of another asset, like a house, it may make it easier to understand. If a house was bought during marriage, it is presumed to be community property, and both spouses have an interest in it. Upon filing for divorce, the Judge can award one spouse the temporary use of the house and prohibit the other spouse from accessing it and taking property out of it. This doesn’t necessarily mean that upon the final divorce the spouse that has been temporarily living in the house will get to keep it.

    So, unless your Company Agreement gives you guidance on who has the right of management while a divorce is pending, the temporary orders are likely to control. Again, you should probably discuss this with your divorce attorney.

  5. Marsha Adams

    If my husband owns an LLC and he is in major debt, can I be held liable for those debts in our divorce? We are in Texas. Will a value be placed on the business as an asset too?

  6. Michell Bradie

    If the LLC was created during the marriage, then it is still community property, although it may be sole management community property (managed by your husband). There will be a value placed on the business as part of the divorce IF it is community property, since that will be considered in a “just and right” division of the property.

    If your husband has properly handled the LLC so that there is no basis for personal liability, then the entity alone would be responsible for the entity’s debt. That would clearly affect the value of the business. (It is unclear from your question if the debt was the obligation of the LLC or your husband.)

    If it is your husband’s debt, then divorce does not affect the rights of creditors, and both you and your husband are both jointly and severally liable for that debt, regardless of whom the judge says is required to pay the debt. Even if your husband is given the debt in divorce, the creditor can still proceed against you if he fails to pay it. That may give you a right to sue your ex for the debt, but it will not prevent a creditor from trying to collect against you.

  7. Cathycurtain

    In Louisiana, my husband created an LLC for rental property before we were married, but since we have gotten married several more rental properties have been bought. If we divirce am i entitled to half of the rents or half of the profits if sold? Or would they be considered his since the LLC was created before marriage.

  8. Michell Bradie

    The laws of each state are different, and Louisiana law is very different than Texas law. I am only licensed to practice law in Texas, and am unable to advise for any other state. I would recommend that you contact an attorney in Louisiana to answer your question.

  9. Heather

    My spouse started a LLC in the third year of our marriage in their name only. We live in Texas and this LLC receives distributions every quarter. Though I am not signed on the LLC, would I be correct in assuming that if we were to divorce, that the LLC would be considered community property and that I would be entitled to a portion of future profit distributions that go to that LLC as an assignee? And if so, is there usually an indication of how long I would be entitled to future contributions after divorce is settled?

  10. Michell Bradie

    You are correct that unless there is some type of separate property agreement, you do have a presumptive community interest in the LLC that was created during your marriage. However, the way that your interest would be handled in a divorce would probably be covered by the terms of the Company Agreement itself.

    If you signed as a spouse accepting the terms of the Company Agreement, it likely provides that you would be entitled to some financial value rather than an actual interest in the business upon a divorce, since you are not currently a named member of the LLC. In other words, the court will take the value of the business, and the percentage ownership interest that you husband holds, into consideration in making a “just and right” division of the community property in the divorce. It is likely going to be considered sole-management community property with the Company Agreement (also known as an Operating Agreement or Regulations) controlling how the interest is valued and paid out or divided.

    When our firm assists our client with forming LLCs, especially when there are other members involved, we encourage our clients to deal with the issues of how to transfer and value the LLC interests in the event of death, divorce, disability or disgust/distrust between members. That is not to say that all Company Agreements will address those points, since every attorney drafts things a bit differently. I do not handle divorce cases, so you should probably talk with an attorney that handles divorce cases that can review the terms of the Company Agreement and let you know with the LLC documents say. Hope that helps!

  11. Heather

    Thank you and no, I did not sign any Company agreement or any kind of document for that matter so I’m guessing I should be covered. One last question, is there anything that my spouse can do now to lock me out of the LLC to protect them from a divorce between now and filing in the near future?

    Thanks so much!

  12. Michell Bradie

    This would be handled no differently than any other asset of the estate if your spouse tried to hide it or sell it for less than fair market value in anticipation of a divorce. Since I don’t handle divorce cases, I can’t advise on what actions a Judge might take when one of the parties acts wrongfully to hide or destroy community assets, but I doubt that they would be very pleased with the wrong-doing party.

    Again, even had you signed the Company Agreement, it doesn’t mean that you have given up your community interest in the asset. All that might mean is that you agreed on how the Company Agreement determined that it should be handled. Sometimes, that might mean allowing the entity to buy back the member’s interest, or it could mean that you would be entitled to be paid a certain amount over time rather than giving you a membership interest in the business. Since all of that is very specific to each LLC, you would really have to look at the terms of the agreement between Members, since they all signed the Company Agreement (or should have, at least) agreeing to the terms.

  13. Bill

    If a single memeber llc I formed during my marriage with me as sole member takes deed over property I inherited, does that remove the separate property status in texas and make it community property?

  14. Michell Bradie

    The answer to your question is maybe. If an entity is formed during marriage, then unless you have some type of separate property agreement (prenuptial or postnuptial) then the entity is community property in Texas. It may be sole management community property, but it is community property never the less. If you transfer separate property into a community asset, you do run the risk of commingling that asset, which may cause it to become community property. Just like if you put cash that was inherited into a joint checking account, after a while it becomes hard to trace it back to your separate property, and it often becomes community property.

    I do not handle any divorce work, so the tracing of property to establish the character is not something that I regularly do. On death in Texas, the presumption is that all community property is owned 50/50 between the spouses, where in a divorce, it is subject to a “just and right division” which may be something different than 50/50. All property acquired during marriage is presumed community property, so you must prove by “clear and convincing” evidence (which is a higher burden than a preponderance of the evidence) to show that it is really separate property. So, you may be able to prove through tracing that it was your separate property when it went into the LLC, but then you must overcome the presumption that you made a gift to the community of your separate property. So it would depend upon whether the judge or jury believed, by clear and convincing evidence, that it was your separate property, and that you never intended to make a gift to the community estate. Since I don’t have a crystal ball, there is no way I could tell you what the outcome would be.

  15. Bill

    Thank you for a quick response and honest information

  16. Michell Bradie

    You are quite welcome.

  17. Steve

    How do you remove a spouses claim to interest in a LLC (property building) for a divorce settlement. The spouse is not a partner
    and will take a cash payment for her value of community property interest. Will the judges settlement agreement suffice? or is their
    some other legal instrument to do this like a Interspousal Transfer Deed
    to protect me in the future

  18. Michell Bradie

    If you have a properly prepared LLC, the Company Agreement should control what happens in the event of divorce, and it would have been signed by the non-member spouse at the time the other spouse signed the Company Agreement becoming a member. By having the non-member spouse sign agreeing to all the terms of the Company Agreement (sometimes referred to as Regulations), they are agreeing to be contractually bound by that Agreement. It should include some way to value the property, and discuss whether a purchase or transfer is required, by whom, and how long they have to pay it out.

    If you do not have a well drawn Company Agreement, that can make things difficult. If it is not properly dealt with in the Company Agreement, the court may allow the Sole-Management Community Property to be retained by the member-spouse and give some other community property to the non-member spouse to make the “just and right” division. If there are insufficient assets to do that, the court may require that the interest be sold to divide the value of the LLC interest held by the member-spouse. How the interest in the LLC is valued is likely to be something that is litigated if not properly dealt with in the Company Agreement. That will be up to the judge or jury if the parties don’t reach agreement. Since you are not dealing with real property, an Interspousal Transfer Deed would not be appropriate.

  19. Sona A

    I have a LLC in my name and my husband name is not there. We are in the verge of divorce. I am planning to leave my his house and buy a new property using my llc. He can’t be a member of llc due to immigration reasons. He can’t work in two companies at the same time. So if you get divorced will the house bought thru llc be considered as community property ? I leave in Texas.

  20. Michell Bradie

    I am not a divorce attorney and am not able to tell you what actions the court may take. However, I can tell you in general what community property is. How it is handled in a divorce can be very different than how it is handled in probate.

    All property acquired during marriage, with some exceptions like gift, devise, and descent, or as compensation for pain and suffering, etc., is presumed to be community property if there is no pre- or post-nuptial agreement to the contrary.

    If the LLC was formed during marriage, regardless of who is listed as the Member, it would generally be considered community property in Texas. It may be sole management community property, but community property none the less, and something that the court would look at when considering a just and right division of property between the parties in a divorce.

    Even if your LLC was set up prior to marriage, and thus separate property, if you use community funds to purchase the house in the name of the LLC to try to claim it as your separate property, that may be considered committing a fraud on the community. I would strongly suggest that you speak to an attorney that handles family law / divorce cases before doing anything like that.

  21. Andrea

    My single dad is one of two members of an LLC. There is no operating agreement. He has been in a nursing home for 2 mths so while he had a Will I have now created a Living Trust. The problem is that the other LLC member will not sign a Transfer of Manager agreement to me despite my father’s own request. How is his half of LLC distributed should he pass?

  22. Michell Bradie

    An LLC is controlled by its Company Agreement (also known as an Operating Agreement or Regulations). Almost any term of a Company Agreement can be changed by the agreement of its members with the condition that ALL members must agree to ALL the terms of the Company Agreement. Some of the very important things that should be covered by a Company Agreement are what I call the Big “D’s”… What happens in the event of Death, Divorce, Disability, and Disgust (someone wants out, or wants to force someone out). What procedure applies? How do you force someone out? Do you have the right to buy someone out? Who has the right to buy someone out; just the entity itself, or another member? Can you transfer your interest by your Will? Can you transfer it to a spouse, or a child, but no one else? How do you go about valuing the business? What time period do you have to pay the value of the buyout? Etc., etc., etc…

    So, when you tell me that there is an LLC and there is no operating agreement, that tells me that they did not use an attorney to create their entity. (They thought that they were saving money.) Now that there is a problem, unfortunately, they are probably going to find out that it is going to be more expensive to fix it than had they gone to an attorney to have it done properly in the first place.

    Just because your father would like you to become the manager of the LLC, it is not normally sufficient to make it so, especially when there is no Company Agreement. You may be able to act for your father as a Trustee under a Living Trust, or even under a Power of Attorney, but that does not allow you to act for him as a fiduciary under an LLC generally.

    Generally speaking, I would assume that the entity would buy your your father’s interest, and that would be part of your father’s estate on his death. However, it is likely to wind up in litigation if the other member does not want to cooperate, since there is no Company Agreement that spells out what is supposed to happen. Arguably, the entity could dissolve, and any assets be divided. The least likely outcome is that your father’s interest in the entity will pass by his Will or Living Trust, since that usually does not happen unless specifically agreed to in the Company Agreement, which doesn’t exist in this case.

    If you father still has capacity, he should sit down with the other member and an attorney and have that attorney assist them in preparing a Company Agreement with the terms that both of them agree on and will sign, otherwise it will potentially be much more expensive in the future.

  23. Kim Deen

    My husband created more than one LLC before we were married. He has used them to purchase land and other personal assets before and during our 2 year marriage If we divorce am I entitled to half of the property or assets (plane) that was purchased after we were married, Or would they be considered his since the LLC was created before marriage? The plane specifically was not purchased for business purposes and it only is used for personal use, however, it was put under the LLC that was acquired before we were married.

  24. Cindy

    My husband has several LLC’s and one corporation which were all formed before we were married. Some of the LLC’s fall under the corporation and some are separate entities. We have been married going on three years now and I have recently found out that the property and many luxury vehicles purchased during our marriage were put under the different LLC’s. None of which have my name but are all used for personal use. I knew about the purchases but had no idea he was “hiding” them under his LLC.
    Are these purchases considered community property?

  25. Michell Bradie

    That is a question that might need to be determined by a court eventually, it sounds like. From what you have said, you might have tracing issues, and other issues that might be best discussed with a family law attorney.

  26. Michell Bradie

    This sounds like it may be an issue that will have to be determined by the court if divorce is filed. I would suggest that you talk with an attorney that handles family law and tracing issues.

  27. Linda Howard

    I was wondering the same thing. My husband created and LLC before we were married and bought the property we live on under the LLC. We are building a house on the property but since my husband is building it there will be no Lien of signing of DOT’s, etc.. No closing at all. But it’s my homestead.. So wouldn’t that protect me if he should predecease me?

  28. Ricardo

    My father was a member of an LLC that he made with his wife and hey used it to purchase a house. He died and the widows shows me a minute of a member meeting in which he resigns/cancels his interest in the LLC. Leaving sole membership to the widow. Can this document be signed only by the secretary and not the member that is renouncing his rights? Even if this is true, since the LLC was formed during the marriage, shouldn’t it be treated as community property irrespective of who the member is?
    thank you,

  29. Michell Bradie

    The LLC, absent a marital agreement to the contrary, is community property since it it was created during the marriage. Who currently holds the membership interest does not change the character of LLC. So whether there is a valid resignation or not by your father in the LLC, the LLC is still community property. If it is now currently held by one person, then arguably it may be sole management community property, but it doesn’t change from community property to separate property just because a member resigns.

  30. Michell Bradie

    If the property is owned by an LLC, it can’t be your homestead under Texas law. If your husband owned the property, and he lived there as his primary residence on January 1st of this year, then he could claim it as his homestead, and you as his spouse would also have a homestead right in that property. However, your husband does not own that property. He owns a membership interest in an LLC. The LLC owns the property. So your husband should not be claiming that property as his homestead, and neither should you.

  31. Sad Mad

    I feel like a fool. I married 5 years ago. I am dyslexic and trusted my wife with all our finances. She owned 2 homes when we married. I did or managed all repairs and up keep, helped with her 2 children. We built a large home and mother-in-law home/over garage; my labor her money. We rented all houses and bought another home after a move. My wife talked me into mortgaging all homes to buy and flip 2 more houses. I did all the renting, and management. I never received a dime for anything, as she always claimed how tight the finances were. She worked and never put me on the family health plan. She set-up an LLC for the rental company, convincing me this was for our betterment. Kids now adults, my wife has filed for divorce and claims everything is hers. In Texas is it legal to deceive and hide assets?

  32. Michell Bradie

    Generally, property that it acquired during marriage, except by inheritance or gift, unless there is some type of marital agreement, is presumed to be community property. If your wife formed an LLC during marriage, even if it is in her name alone, it doesn’t change the character of the property. The court might consider it sole management community property, but it would still be considered community property unless it falls within an exception. You should get your own attorney to represent your interests in this divorce.

  33. Jane kittleson

    I have been married 28 years. March 2018 my husband filed for divorce. Three years ago he opened an individual LLC using $400,000 of Roth money he acquired during our marriage. He now wants to state it’s solely his money. My attorney says I have to sue him versus get half as community property. I do not think this is correct. Can you please advise. Thank you.

  34. Michell Bradie

    Jane, I do not handle family law. I do know that in Texas, property that is acquired during marriage is presumed to be community property, and that would include retirement funds. An entity that is created during marriage in Texas is also community property, even if it may be in one person’s name. It may be what is called “sole management community property”, but it still does not change the character of the property, and it is still subject to division on divorce, and the court should consider the value of that property in the division of the property. Now, how it would ultimately be divided if the parties cannot reach agreement is something that is outside my area of expertise. A contested divorce is a “lawsuit”, so perhaps that is what your attorney means. You might ask your attorney to clarify. If you still to not think that what you are being told is correct, then you likely would need to speak with another attorney that handles divorce cases, since how property is handled on death and on divorce is very different. I hope that helps.

  35. D Sheffield

    In Texas, if the sole member of LLC dies and there is no operating agreement, does LLC dissolve automatically and next of kin gets any assets of LLC?

  36. Liz

    Hi. If the LLC is formed prior to marriage, and then the manager gets married, are the assets for the LLC considered community property?

  37. Michell Bradie

    The LLC is the asset that was created prior to marriage, so it remains separate property after marriage. The member that owns an interest or perhaps 100% interest in the LLC, and may also be a manager (if it is manager managed) still retains their separate property interest in the LLC. The assets of the LLC belong to the LLC (which stands for Limited Liability Company), and NOT to the member or members that hold an interest in the LLC. If a member invests community property funds into a separate property LLC, it is possible that a divorce attorney might make a claim for reimbursement of some of those funds if they can be traced. However, that does not make the entity itself become community property. So, remember that the Member or Members own the interest in the entity (the LLC), and the entity (the LLC) owns the assets inside the LLC. However, the members DO NOT own the assets inside the LLC.

  38. Michell Bradie

    LLCs don’t normally dissolve automatically anymore. Usually the Executor of the estate, or the Administrator of the estate will need to go in take over the Member’s interest to either wind up and terminate the entity, and distribute any assets left within the entity to the estate, as an asset of the estate, or to sell the LLC to get some value out of it, assuming that none of the heirs of devisees wish to continue the business. The Executor/Administrator can’t just take the asset of the LLC, since those assets don’t belong to the estate, they belong to the LLC. The Deceased Member’s interest in the LLC is what belongs to the estate.

  39. Lisa


    My husband created a LLC last year. We have been married 24 years. I filed for divorce this past March. He left me a vm claiming i am 50% owner of the LLC and that I am liable to pay taxes in his profits which comes to thousands. I am not involved in his business. I never signed anything when he started this LLC. w
    We live in Ohio. Is this true? His accountant says he can help and sell my shares to my husband for a dollar. So I will not be liable. Didn’t I have to sign to be 50% owner? Is he just trying to get me off so I’m not entitled to any of the business?

  40. Michell Bradie

    You live in Ohio, and I am licensed to practice law in Texas; not Ohio. I do not know the laws of that jurisdiction, and am not able to tell you what their laws are.

  41. Taylor

    I have a client that bought a house in her LLC’s name. She is now selling it. The title co sent her a seller’s info sheet wanting her name and her spouses name. Her husband is not part of the LLC. Does she have to list him and have him attend and sign off on closing docs since he is not part of the LLC?

  42. Karin

    HI, My husband is a member of an LLC formed during our marriage with two other members. Do the other members owe me a fiduciary duty of care since the LLC is considered community property?

  43. Michell Bradie

    The answer to that depends on the facts that the title company may be concerned about. An LLC interest is not held in a person’s “name”. It sounds like the wife is a member of the LLC, which holds the LLC interest. If the LLC was formed during marriage, it would likely be considered sole management community property in Texas, and if the title company has concerns that the source of funds to purchase the property that was in the LLC came from the community estate, having the spouse sign off on the closing is likely giving the title company the protection that they desire should the husband later claim that wife was using the entity to commit a fraud on the community estate, for example. From the wife’s perspective, it may be over-kill, but from the title company’s perspectives, it is covering their bases.

  44. Michell Bradie

    A managing member owes a duty, similar to a fiduciary duty, to other non-managing members of an LLC. However non-managing members do not owe a similar duty to other members of an LLC. So, to begin with, there is insufficient information to know how the LLC was set up to know what duties may be owed to any of the members.

    I don’t do any divorce work, and am not qualified to tell you how that works in that area of law. My general understanding is that one spouse owes a fiduciary duty to their other spouse. I would not expect, however, that just because one spouse holds a sole-management community property interest in an LLC as a member of that LLC, and that they may owe their wife a fiduciary duty, that even if hypothetically one of the other members owes the husband (as a member of the LLC) a fiduciary duty, that it therefore means that they by extension owe the wife a fiduciary duty as well. If you have a family law attorney that is representing you, I would run it by them.

  45. PAUL

    Can a married person buy property in own name without spouse. Maybe in LLC or any other way.

  46. Chris

    Started my LLC in 2000, was married in 2005, in 2006 a company purchased my largest service agreement that I had acquired in 2004 as stated in the buyout agreement. Prior to selling I converted the LLC to a Domestic LP for tax purposes, Closed entire Domestic LP month later in 2006 since majority of business was purchased. Stayed home for next year raising my son but kept proceeds in a business account under Domestic LP without co mingling or adding spouse to bank account. Year later 2007 I purchased investment property and in 2020 wife filed for divorce. She claims investment property is community property and I contend that it is actually separate property on the grounds that 1. The income the business generated (community property) from marriage until business purchase did not and was not used to purchase investment property 2. The Domestic LP protected and funds generated 3. What was actually purchased was a contract I had acquired in 2004 prior to marriage therefore was separate property. Where do you think I have a case?

  47. Michell Bradie

    They may purchase property in their own name, but that doesn’t necessarily make is separate property. Absent a marital agreement, in Texas, property acquired during marriage except by gift, devise or descent, is presumed to be community property. It may be considered “sole management” community property, but it is community property never the less.

  48. Michell Bradie

    You also sent our office an email that we responded to. This blog is for general discussions that apply to a general concept or general area of law. It is not intended to give a legal opinion and specific legal advice on a person’s specific legal matter. We do not have an attorney-client relationship, and you should discuss specific details with your own attorney where attorney-client communications can be protected and remain privileged, and not in a public forum.

  49. Lauren Reames

    My husband and I live in California and are divorcing after 30 years of marriage. One of our LP’s is incorporated in Texas and follows Texas state laws. I am a Limited partner in the company with a minor stake. My husband is a partner with a 25% stake. It was started during our marriage and originally based on gifts/inheritance. Would I be entitled to 1/2 the interest made for both our shares in a divorce in California with a company following Texas laws?

  50. Michell Bradie

    I am not licensed in California, and I do not do any divorce work, so you really would need to speak with an attorney in that jurisdiction to see how they handle the division of property during a divorce there.

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