How Do I Acquire an Ownership Interest in a California LLC as Separate Property?

Question:    I am married and live in California.  I intend to form a single member California LLC.  I know that California community property law my spouse will automatically own  one half of my interest in the LLC.  How do I acquire my LLC interest as my separate property?

Answer:  California residents who are married or who are domestic partners own assets one of two ways: (1) as community property or (2) as separate property.  Community property ownership means each spouse or partner owns an undivided one half of the total interest in the asset.  Separate property ownership means that one person owns 100% of the property and the other person does not own any interest in the property.  Because California law provides that all property acquired by one spouse or partner is automatically community property unless it comes from a gift or an inheritance both California residents will own the new LLC membership interest as community property unless the non-owner signs a document in which he or she disclaims any ownership interest in the LLC.

When we form a California LLC and the one of the members tells us that he or she is to own the membership interest as separate property we prepare a document called a “Disclaimer of Interest” for the non-owner to sign.  When signed the non-owner acknowledges that he or she does have have any ownership interest in the LLC membership interest.