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September 06, 2017

Does a Spouse Commit Civil Theft by Taking Funds From a Corporation Jointly Owned With Her Spouse?

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Does a Spouse Commit Civil Theft by Taking Funds From a Corporation Jointly Owned With Her Spouse?

Incorporating a business offers shareholders a number of key protections by creating a legal separation between the business’ assets and the shareholders’ personal assets. Yet when a corporation is jointly–and solely–owned by two spouses, it can be tempting to see the business’ assets as part of the marital estate. However, the fact that the sole shareholders of a corporation are married does not convert the corporation’s assets into marital property, as a family lawyer Tampa FL trusts can attest.

This principle was upheld by the Fifth District Court of Appeal in their recent ruling in Doctor Rooter Supply & Service v. Laura McVay. This case involved allegations of civil theft by Thomas Wall against his ex-wife, Laura McVay. While married, Wall and McVay were joint shareholders in Doctor Rooter Supply and Service. The couple divorced in 2012, with Wall becoming the sole owner of the company.

However, after the divorce was finalized, Wall found out that McVay has taken about $116,000 from the company during her tenure as shareholder and office manager. Through the corporation, Wall sued McVay for civil theft among other allegations. However, McVay provided numerous affirmative defenses, including the assertion that Doctor Rooter’s assets were actually marital assets (and therefore her taking would amount of dissipation of marital assets, not civil theft); the trial court agreed by granting summary judgment in her favor.

The Fifth District Court of Appeal concluded that the trial court had erred in granting summary judgment. One key part of their decision hinged on McVay’s assertion that the business’ assets were marital property. The appellate court asserted that a corporation owns its assets; the corporation may have been a marital asset, but its earnings were not. Therefore, by taking money from the business (outside of payment for services rendered or dividends), McVay could be found accountable for civil theft–an important lesson for all spouses who jointly own an incorporated business in Florida.

Thanks to our friends and contributors from Mckinney Law Group for their insight into family law and business practice.

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