In this video, you will get answers to these questions:
Should my spouse and I own an LLC together? That’s the question I’m answering today. I’m Aaron Hall, a business attorney in Minneapolis, Minnesota.
You might be forming a business with your spouse. Maybe it’s an LLC, maybe it’s a Corporation. The question often comes up, should we both own it 50/50? Or maybe 51/49? Often with the majority, 51%, owned by the female and then the [minority] owned by the male so that the business can be considered woman-owned or minority-owned. These kinds of questions come up. So first off on that minority-owned question, I ask my clients, “Will you be applying for government contracts or are there customers that you’re trying to get who actually care whether the business is woman or minority-owned?” If the answer is they don’t care, then let’s not add that complexity to your business. The next question is, “Is there any other reason to have it owned by two business owners?”
The first reason people say is, “Well, I hope we don’t get divorced, but if we do we want to have clear that it’s 50/50 between husband and wife.” Well in most States, like Minnesota, ownership of an LLC or a Corporation is a marital asset, just like a piano or a car, and so for that reason, the value of it is divided up in the divorce process anyway. It doesn’t matter if all the shares are owned by husband or wife, so usually, the risk of divorce is not a good reason to have it be 50/50 ownership. The next question is, “Are there any consequences to having 50/50 ownership?” And the answer is yes. There’s typically an additional tax form required on income taxes when you have 50/50 ownership. So usually the best practice is for a business to be owned by one spouse.
It just simplifies taxes and there’s really no reason to have both on there typically. Which spouse? Usually, it’s the one who’s actually running the business, the one who is actually acting as the owner. Now, this may vary from state to state. There might be other issues to take into consideration here and that’s why the disclaimer that I linked to in the description below is so important. I do these general educational videos to help you learn about the topics in general and spot issues to discuss with your attorney, but this isn’t a replacement for an attorney, the attorney who knows your local laws and can spot issues and exceptions that I haven’t necessarily covered here.
I’m Aaron Hall, a business attorney in Minnesota. If you want to learn more about these topics, you can see the link in the description below, or feel free to subscribe to this channel so you can get more videos like this as they’re published.