Q: I started an LLC during the marriage with husband's consent. It was only a few months old when divorce papers served.
There is debt associated with the business (a business credit card and money we owe a business coach). I am no longer working on the business, having had to get a job since my estranged husband agreed to be the breadwinner while we got the business up and running. When he left, I had limited income. I didn't dissolve the LLC yet, so it still shows as active, but I plan to. Since the debt is in my name (he had a bankruptcy before marriage so he couldn't sign anything), will the judge make me solely responsible for the business debt accumulated during marriage? I live in Arizona, and the divorce papers were filed here.
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A: In general, business debt follows the business. So whoever retains the business takes that debt with the business. It is usually calculated into the equity of the business when determining its value. However, if the debt is not in the business name but in one of the parties' name, the debt could be divided equitably as a community debt. I would assume that the credit card is in the business name since you said it was a business credit card; however, if it is a credit card that is actually in your name, but you used it for the business, that could be divided as a community debt. The same would apply to the debt associated with the business coach. It ultimately boils down to who is responsible for the debt: you, your ex, or the business. Keep in mind that your ex may argue that although the debt is in your name and not the business, the debt was used for business purposes and therefore, he should not have to pay half the debt. You could argue he consented to the debt since he agreed to start the business. This type of situation is very fact-specific, so make sure to consult with an attorney to discuss all the nuances that may apply to your situation.
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