What is a spouse’s liability regarding an unincorporated business?
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What is a spouse’s liability regarding an unincorporated business?
My husband has a incorporated business. There is approximately $600,000 of debt primarily owed to investors in the business. If my husband passes away, what if any is my liability. Is there any way to protect myself from the investors coming after me for the money owed to them?
Asked on July 13, 2011 under Business Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
If the business is unincorporated (and also not an LLC; e.g. it's a sole proprietorship or d/b/a), then the money is personally owed by your husband--his debt is your debt. Creditors can therefore go after joint or marital assets--a joint bank account; a home or property you own--for payment. If your husband passes away, creditors could seek reimbursement or payment from his estate--i.e. from that property which would otherwise go to you--and therefore you could end up inheriting nothing if his debts exceed his estate.
Therefore, there is considerable risk or exposure for you. You and your husband should consult with a bankrutpcy attorney--owing that much, filing for bankruptcy to discharge debt may be the way to go. Even if it's not, you could benefit from advice on how to best shelter and protect personal assets from business debts. Good luck.
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