7 tips for entering a business partnership with your spouse

Business partnerships are complicated under any circumstances, and going into business with your spouse elevates the challenge. Running a company with your spouse can be rewarding, but unless you carefully consider the structure of your family-owned business, problems at work can quickly spill into the home. 

Benefits of partnering with your spouse

• Flexible work schedule: Co-owning a business allows spouses the flexibility to ensure one partner can be at home while the other works—particularly important if you have children or other family to take care of.
• A trusted business partner: Partnering with a spouse eliminates a lot of the risks of partnering with a stranger. The trust established by marriage is a valuable foundation for a business partnership.
• Shared passion and support: It’s easy to align your goals when business profits support one household. Sharing ideas and expectations after work can fuel mutual passions and goals.
• Chance to create generational wealth: Partnering with your spouse instead of an external partner doubles your ability to create wealth you can pass onto future generations. You can also bring children into the family business when they’re old enough.
• Opportunity to strengthen your communication: Partners need to be on the same page for their business to be successful. Co-owning a business with your spouse provides a chance to hone communication skills, which can strengthen your relationship both at work and at home. 
• Potential tax savings: Jointly filing taxes can be cheaper than filing individually, and businesses enjoy tax deductions that are unavailable to individuals. Spouses who are business partners benefit from both.

Potential challenges of partnering with your spouse 

• Increased financial pressure/instability: If the business fails, both spouses bear the burden. You’ll need to prepare for the possibility of losing both your incomes at once.
• Work/life balance: Finding a work/life balance is challenging when your partner is also your business collaborator, blurring the lines between your professional and personal lives.
• Difficulty taking a family vacation: Managing the business while a partner is away can be difficult, and delegating responsibility while both of you are gone—maybe more so.  
• Communication issues: Workplace communication problems can spill over into your home life, making it difficult to separate business and relationship issues.
• Co-dependence/lack of individual work: Bringing a reluctant or unqualified spouse on board can lead to a lopsided workload in which one partner bears an unfair share of responsibilities.  

Tips for a successful business partnership with your spouse

1. Choose the right business structure.

Your business structure defines stakes, responsibilities, and liability. Consult a lawyer, decide on a structure, and define how profits will be distributed to prevent disputes down the road.

2. Document your partnership agreement.

Get your partnership agreement—including business structure—in formal writing. Draft contingency plans for separation or dissolution and include them in the agreement.

3. Define your roles and responsibilities.

Assess your strengths, weaknesses, and interests, and decide your responsibilities together. You’ll need to account for all operations, management, and final authority on major decisions.

4. Communicate effectively.

You’ll need a new style of communication for your business partnership that doesn’t exist at home. Consider books, courses, or webinars together to help you develop your business communication skills.

5. Create a shared schedule.

Set boundaries for work and for time off, including a hard end to the workday and dedicated time apart if you spend your workday together. If you have children, make sure one parent is always available for them and that you set time aside for the entire family to enjoy together. 

6. Work as a team.

Collaborate on big decisions, share triumphs and failures, and avoid sole responsibility or blame. Position wins and losses as collective issues shared by both partners.

7. Discuss your exit strategy.

Every partnership agreement needs an exit strategy. When you begin doing business with your spouse, it’s crucial to make plans in case one partner wants to reduce their role or leave the business—in case you both decide to sell the business, or in case you choose to get a divorce.

Tax considerations for couples in business together

For spouses in business together, it’s important to separate business finances from personal. The simplest way to do this is to issue yourselves paychecks and W2 forms, and open a business checking account.The business, based on the structure you agreed upon, will file its own taxes. 

In a sole proprietorship or LLC, profits are attributed to owners, who are then responsible for the associated taxes. You can reduce liability by maximizing your business deductions, and then jointly filing your taxes as a couple. While this won’t boost profits, it’ll help you keep more of your earnings. Be sure to seek counsel from an accountant during this process.