So, you want to start a business with your spouse? For many couples, the thought of starting a business together is exciting and promising. Going into business with your husband or wife can be a wonderful way to build a life together — you will be able to spend more time together, pursue common interests, and build wealth as a team. In addition, you have a level of trust that is not easily found in business relationships. But there are important legal and tax implications of a joint venture. What’s more, you and your spouse should both carefully consider the impact that your business might have on your relationship.
In Texas, a business partnership is created anytime two or more persons carry on a business for profit as owners, regardless of whether they intend to create a partnership or call their association a “partnership” or another name. See Texas Business Organizations Code Sec. 152.051. Partnership law has specific legal consequences and risks. Therefore, by simply starting a business together, you will have accepted specific legal consequences – whether you know it or not. Every business is unique, so you should consult with an attorney of your choice to discuss your business plans and ensure that you start out on the right path.
Depending on the type of business entity formed and the relationships of the spouses to the business (i.e. owners, employees, independent contractors), married business partners can elect to take advantage of an election authorized by the Small Business and Work Opportunity Tax Act of 2007. Taxes are an important consideration, therefore spouses should also work with an accountant to best understand and take advantage of tax elections.
1. Consider your finances. It’s very important to think about the financial impact of owning your own business together. Consider the month-to-month impact of earnings and your needs (esp. with the potential for business downswings). Also carefully consider the potential business impact of pregnancy and childrearing, extended disability, or even death.
2. Divide business responsibilities. Starting with a business plan is a great first step, but it takes implementation and flexibility to work. Carefully consider how to handle your business responsibilities. Then divvy them up and give each other the space to get work done.
3. Maintain open communication. Operating a business together will require you to maintain regular and open dialogue. It’s critical to avoid hiding problems. It’s also good advice to promptly and directly discuss concerns, so they don’t fester.
4. Set Boundaries. Although open and regular dialogue is important, it’s also vital to ensure that business doesn’t consume your lives. Establish boundaries for when and where you’ll talk about business, and then stick to it to ensure you protect your marriage.
5. Consider how to resolve stalemates. One of the biggest challenges of 50/50 ownership can be how to resolve disagreements. As you’re planning, carefully consider how you will resolve stalemates. Depending on your situation, it might be best to establish something other than a 50/50 decision-making arrangement.