Background
Travis and Sasha Rasmussen married in 2013 in Arizona. Travis owned Choice Pool Care, LLC, originally a pool service company, which he later used to route residual commission income earned as an independent contractor selling credit card merchant services for Payroc. The LLC received 1099s from Payroc, filed federal business returns, claimed over $40,000 in business deductions annually, paid Tennessee franchise and excise taxes, and reported over $170,000 in business income in 2022. Travis also accepted an $87,500 buyout from Payroc for one-third of his residual “book of business.” The family relocated to McNairy County, Tennessee in 2020, after which Sasha became a stay-at-home mother to the couple’s five children. Travis filed for divorce in 2022.
At trial, the central dispute was whether Choice Pool Care, LLC constituted a marital asset subject to equitable division. Travis argued he merely held a “sales job” and the LLC was only a tax-reporting convenience with no independent business value. Sasha argued the LLC was a genuine business with a transferable book of accounts generating largely passive residual income, and that she had contributed to its growth through her role as homemaker and primary caregiver. Neither party retained a business valuation expert. Sasha offered a lay valuation of approximately $1.8 million based on a ten-year average of reported business income; Travis offered no valuation at all.
The trial court found that Travis was a business owner — not an employee — and classified Choice Pool Care, LLC as a marital asset. Without formally valuing the business, it awarded Sasha “a 20% share of the business” along with transitional alimony of $1,500 per month for three years and child support. When both parties moved for clarification, the trial judge acknowledged he lacked a valuation but declined to adopt either party’s figure, ultimately leaving the 20% award in place without a stated dollar value. Travis appealed.
The Court’s Holding
The Court of Appeals affirmed the trial court’s classification of Travis’s 100% membership interest in Choice Pool Care, LLC as marital property. Under Tennessee Code Annotated § 36-4-121(b)(2)(A), marital property includes all personal property — tangible and intangible — acquired during the marriage. Under Tennessee Code Annotated § 48-249-502(a), a membership interest in an LLC is personal property. The appellate court found ample evidence in the record — the LLC structure, 1099 income routed to the company, business tax returns, franchise and excise tax filings, claimed business deductions, a completed lump-sum sale of a portion of the residual accounts, and Travis’s own acknowledgment that he could theoretically hire others to service accounts — to support the trial court’s factual finding that a business, not merely personal earning capacity, existed as a marital asset.
However, the court vacated the trial court’s equitable division ruling. Tennessee law requires that marital property be identified, classified, valued, and then distributed. The trial court skipped the valuation step entirely and then acknowledged on the record that it could not assign a dollar amount to the 20% award. An equitable division conducted without first valuing the asset is legally deficient, and the court could not approve an award whose dollar value was entirely indeterminate. The case was remanded for the trial court to value the business and then equitably divide the marital estate.
Because the proper division of the marital estate may affect the appropriate levels of child support and alimony — and because the trial court’s income calculations could change materially depending on how the business interest is ultimately valued and distributed — the appellate court also vacated the child support and alimony awards and remanded them for reconsideration after the business valuation proceedings conclude.
Key Takeaways
- A spouse’s 100% membership interest in an LLC is personal property under Tennessee law and qualifies as marital property if acquired or grown during the marriage, regardless of whether the spouse characterizes the arrangement as merely a “tax convenience” or a “sales job.”
- A trial court cannot skip the valuation step in the four-part marital property division process; awarding a percentage of an unvalued business leaves the award legally indeterminate and requires vacatur.
- Passive or largely passive residual income streams routed through an LLC — including a salesperson’s “book of business” that generates recurring commissions — can constitute a transferable business asset rather than pure personal earning capacity, particularly where the accounts can be sold or assigned and third parties could service them.
- Child support and alimony awards tied to a spouse’s income from a business interest that is being remanded for valuation must themselves be vacated and reconsidered to avoid impermissible double-counting and to ensure support calculations reflect the proper post-division income picture.
- A party who declines to present valuation evidence at trial — including by denying that any business exists — takes a significant risk; the appellate record here contained only Wife’s lay valuation, which the trial court considered but did not formally adopt.
Why It Matters
This decision reinforces that Tennessee courts will look past entity labels and self-serving characterizations when classifying assets in divorce. A spouse who deliberately structures income through an LLC, claims business deductions, files business tax returns, and retains a transferable book of accounts cannot credibly argue that no business exists for equitable division purposes. Family law practitioners advising business-owning spouses should ensure that valuation evidence is introduced at trial; silence on valuation will not prevent classification of the asset — it will only complicate and delay the division.
The ruling also highlights the sequencing discipline Tennessee law imposes on trial courts: equitable division requires an actual valuation, not an estimated percentage applied to an unknown base. Courts that attempt to shortcut the process by awarding a share of an unvalued business will face reversal. For practitioners, the takeaway is clear — retain a qualified business valuation expert before trial, and be prepared to address how any business award interacts with income-based support calculations to avoid the double-counting problem that led to the additional vacatur of child support and alimony here.