My husband has decided to spontaneously start a business without any knowledge of what it takes to run one. I already have bad credit from all of the financial mistakes we made 8-10 years ago. I'm ready to start improving my credit but I'm afraid if something goes wrong with his new business, my income and credit will be affected. For instance, if he gets sued or just gets in over his head creating new debt, can the authorities order me to pay this debt or hit my credit for non-payment? I want no part of this business and my name will not be included as a member or otherwise. It's my understanding that as long as the business is formed as an LLC, our personal income will not be affected. Is this true?
If the business is formed as an LLC then your personal incomes cannot be seized for credit that is granted to the business. However a lot of times credit is extended with a "Personal Guarantee" rather than to the business entity itself. So in that case your husband would be personally liable. If you do not sign or co-sign for any credit then you could not be held liable and your individual income or wages could not be affected in the event of a default or judgment. But if you have joint accounts then it could possibly hurt you. Make sure he is not using any joint credit or checking accounts to make payments on behalf of the business.
+1. Definitely check that he is using separate accounts to run the business.
If you live in a community property state then I believe there could be some situations where you're liable for each other's debts ~ I'm not exactly sure on the details but you should look at this.
Also be aware that any assets that he might own jointly with you, such as car, house...etc.. could potentially be an issue as well.