Many spouses start a business together. Some met in graduate school and pursued the same profession, such as medicine, dentistry, law, architecture or engineering. Others have a shared passion and experience and decide to stop working for others and go out on their own.
While there can be many advantages to starting a business with the person you know best and trust more than anyone, that doesn’t mean you can cut corners when developing your business agreement and other documentation. In fact, it’s crucial for the health of your business and to get the trust of others who work for you that everything is codified – just as it would be if you started a business with someone you knew only professionally.
Decisions to make before you begin
If you’re still in the phase where you’re talking about starting a business, there are a number of questions to consider. Following are just a few:
- What legal structure is best for you? Partnership and limited liability corporation (LLC) are two of the most common, but there are others.
- Will both participate in the day-to-day management?
- How will your responsibilities be divided?
- If you have children, will they be on the premises some of the time? (Remember that if you allow this, your employees may expect the same.)
Of course, there are a number of tax considerations as well, so it’s wise to talk with an accountant or tax advisor who works with business owners.
What kind of business agreements are needed?
Once you’ve made these decisions, it’s crucial to draw up a business agreement. The type of business (for example, partnership or LLC) will determine what kind of agreement you have. Typically, these agreements specify each partner’s contributions to the business, how profits and losses are divided, how new partners are added and any number of other things you want to include.
It’s also wise to draft a buy-sell agreement. This will describe what happens if one spouse leaves the business for any reason (whether death, divorce or simply to pursue other interests).
By starting off your business with solid, detailed agreements in place, you can prevent needless and costly conflicts down the line. It’s wise to seek legal guidance as you prepare these.