Going into business with your spouse or romantic partner can be an amazing opportunity—but it can just as easily be an absolute nightmare. Regardless of how amazing your love life may be, there’s no guarantee you’ll be equally compatible in a working relationship. And if things don’t work out, it has the potential to wreck both your business and marriage.
That said, though it’s bound to be just as—if not more—challenging than maintaining a romantic relationship, if you are able to stick it out and grow through the experience, establish appropriate boundaries, and respect each other’s differences, building a business with your spouse or significant other can be one of the most rewarding experiences of your life.
To improve your odds of success, here are four things that have enabled successful couples to make their working relationships work:
1. Formally Document Your Business Relationship
Getting married involves taking vows and signing a marriage license, and you should treat your business relationship with an equal degree of formality. Before opening your doors, clearly outline the terms and conditions of your company’s ownership, operation, and dissolution in formal legal agreements that are signed by you both. Just creating these agreements will often show you how well you’ll be able to work together and handle hard conversations.
Along the same lines, just like you need a third party to witness and officiate your marriage, you should have all of your business agreements navigated and reviewed by an experienced business lawyer like us, and never rely on generic online agreements. We can not only ensure your agreements are sound and in compliance with state laws, but we can also help you surface the tough conversations and resolve the conflicts that are inevitable in business.
2. Clearly Define Your Responsibilities
Although you may have a casual division of household chores and responsibilities in your marriage, trying to run a business without clearly defined roles and responsibilities is a recipe for disaster. With each of you trying to do things your own way, you are not only bound to run into conflict, but it will also encourage redundancy, wasting both time and energy that could be put to much better use.
Instead, you should clearly define the operation’s responsibilities and decision-making powers based on your individual strengths and preferences. In this way, you can divide and conquer the aspects of the business where each of you naturally excel, and use your differences to complement, rather than restrict, your company’s success.
3. Set Up Your Business Entity
Unless you set up a separate legal entity for your business, your company will automatically be considered either a partnership (if both of you are owners) or a sole proprietorship for tax purposes. And since partnerships come with complex tax-filing requirements and sole proprietorships offer no liability protection for your personal assets, meither are the most ideal entities for a family business.
For both liability protection and tax advantages, you should consider setting up your business as a limited liability company (LLC) or S-Corporation. Both LLCs and S-Corporations not only shield your personal assets from debts and lawsuits incurred by your business, but they also offer numerous tax-saving benefits, including a potential straight 20% deduction on all of your company’s qualified business income, thanks to the Tax Cut and Jobs Act.
That said, beyond LLCs and S-Corporations, there are other entities that might be better suited to your business, so consult with your Family Business Lawyer™ to discuss all of your options. We can not only advise you in selecting the entity that’s right for your situation, but also support you in maintaining the administrative formalities required of your chosen entity.
4. Have Your Own Space
While at first it might seem like a dream come true to spend all day, every day working together with the one you love, spending every waking hour with each other can actually be quite unhealthy for both your business and marriage. This is particularly true if you work from home, where the line between your business and home life can disappear completely.
Consider creating separate workspaces, so you have the freedom to develop your own routine and establish a healthy boundary between your personal and business life. If you can’t afford to have an outside office right away, this can be as simple as working in separate rooms, or you might even try a community office space. These communal workspaces can provide the ideal way to get out of the house, network with like-minded people, and maintain your sanity.
And, make a deal to never talk business in the bedroom or the bathroom! This may sound silly, but it could save your relationship. Save your intimate spaces for intimacy, and only talk business in the “office” (even your home office) at predetermined times.
Keep Your Eyes Wide Open
If you are thinking about going into business with your spouse or life partner, you need to get absolutely clear on the potential problems, risks, and benefits that these jointly run ventures entail. You don’t want to get stuck ruining both your romantic relationship and your business relationship at the same time.
Before you jump into business together, meet with us, as your Family Business Lawyer™ to discuss the best ways to ensure your family business will thrive. With our trusted guidance and support, we can help you manage the legal, insurance, financial, and tax issues to ensure your business—and marriage—stay as healthy as possible. Call today for an appointment.
This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you.