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Avraham "AY" Rappaport, CLTC
President, Financial Professional
Yaniv "Jay" Natanov
President, Financial Planner
Eli Rappaport
Vice President, Financial Planner
Shlomo Rosenstein
Financial Professional
Ozzie Marizan
Financial Planner
Joseph Greer
Employee Benefits Administrator
Dylan Pinsky
Client Relations Manager
Premier Financial
6395 Dobbin Road, Suite 102
Columbia, MD 21045
Phone: 240-309-6001
Email: dylan.pinsky@prudential.com
Website: premierfinancial1.com
January/February 2022
When Spouses Are Co-owners
Spouses who own a business together know the challenges of mixing their personal and professional lives. But what happens if the time comes when one partner wants something different? Here are a few options to consider when divorce, the desire to pursue a different occupation, or loss of interest in the business affects your business partnership.
Consider a Buyout
With a buyout, one spouse agrees to purchase the other spouse’s interest in the business. Generally, a buyout between divorcing spouses is tax free and is not considered a sale for tax purposes, as long as the buyout occurs within a specific time frame related to the divorce. Both partners will need to agree on the valuation, and each spouse may want to hire his or her own appraiser.One issue with a buyout may be the difficulty of one spouse coming up with cash or other liquid assets to buy the other spouse’s share. Dividing other marital assets equal to part of the business’s value or agreeing on installment payments in place of a lump sum are possible options. Keep in mind that a future sale of the company could have tax consequences for the spouse who retains the business.
Sell the Business
Selling the business is a potential solution if one or both of you decide to move on to something else. Before you decide on this option, consider whether the business’s profitability and market value are likely to attract a third-party buyer under current economic conditions.Remain Co-owners
If one spouse opts for a different career, you may choose to retain the business alone or with a new partner. When, divorcing spouses are both interested in continuing to run the business, co-ownership may be an option. However, success depends on both spouses agreeing to conduct their business relationship as if they had never been married.Have an Exit Strategy
Your original business plan should include an exit strategy. Unlike succession planning, which grooms a successor to assume a departing owner’s duties, exit planning defines the process for transferring a company and its ownership to another person, team or entity. Having an exit strategy in place when you start your business can prevent conflict later.1052403-00001-00
Premier Financial is not affiliated with Prudential Financial. Premier Financial sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Premier Financial is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Premier Financial and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Dylan Pinsky is employed by Eli Rappaport and not The Prudential Insurance Company of America or its subsidiaries.
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