Property owned by a limited liability company belongs to the company and is generally not considered either separate or community property subject to distribution in a Texas divorce case. The limited liability company’s owners, known as “members,” do have an ownership, or “membership” interest in the company. That membership interest can be classified as separate or community property and distributed in a divorce. Additionally, distributions made from the company are community property, even if only one spouse is a member.
A husband recently challenged a finding of constructive fraud and order for reimbursement based on expenditures by and loans to his limited liability company (LLC). He was the LLC’s sole member before and during the marriage. The trial court granted the wife’s constructive-fraud claim and ordered reconstitution of the community estate. The court also characterized the LLC as the husband’s separate property and reimbursed the community estate for loans made to the LLC.
The husband appealed, challenging the trial court’s findings and conclusions regarding the constructive-fraud and reimbursement claims.