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Tom Meaglia, ChFC®, AEP®, CLU®, MSFS

Chartered Financial Consultant

Investment Advisor Representative

CA Insurance Lic. #0567507

 

Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750

 

Toll Free: 800-386-3700

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Email: tom@meagliafinancialconsulting.com

Website: www.meagliafinancialconsulting.com

January/February 2022

When Spouses Are Co-owners

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.


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Investment advisory services are offered through Fusion Capital Management, an SEC Registered Investment Advisor. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration is not an endorsement of the firm by the commission and does not mean that the advisor has attained a specific level of skill or ability. All investment strategies have the potential for profit or loss.
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