Success in your professional life often works the same way as success in your personal life. It requires rules, guidelines, hard work, commitment, flexibility, and dedication.

If you own and operate a business with your spouse, then you probably already have unique challenges that are often complicated.

Owning and operating a business with your spouse has many complex and unique challenges.

For example, if you are the boss, you can't usually speak to your spouse in the same manner as an employee if there is a dispute. Running a company alongside your spouse could quickly become a situation where you are “in the doghouse.”

Constantly working toward business growth can add stress to any company, but the tension is enhanced when it involves married couples in a business partnership.

Since both spouses are heavily invested in the business, any significant challenges will strain your relationship. However, there are some guidelines you can follow to lessen the tension while running a business with your spouse, but you should expect a roller coaster.

One of the most basic rules of owning and running a business with your spouse is a total commitment to the partnership of the husband and wife, including inside and outside the company.

If there are trust or communication issues, you will likely fail as the challenges will become overwhelming. Let's be honest; working with your spouse at work can be difficult. Nobody wants to damage their relationship due to the responsibilities of running a company.

So, to have the best chance of success in your business, you must make some decisions and mutual agreements with your spouse that benefit the marriage. Our California family law and divorce lawyers will examine this below.

What to Do Before Getting into Business with Your Spouse?

Planning is often the key to success if you are considering starting a business partnership with your spouse. There are some initial decisions that your will need to make, such as: 

• Will both spouses be listed as business owners?
• Which spouse will primarily run the company?
• What are the tax considerations?
• Who will manage the financial issues of the business?
• Who will make the primary decisions?
• Who will deal with the employees?
• Will both spouses work full time at the business?
• Does one spouse have other outside responsibilities?
• Which spouse will handle the business marketing?

One of the most significant decisions is whether you will both own a share in the business and work as partners in running the daily business operations.

Which Spouse Will Own the Business?

If you decide that both spouses are owners and will participate in operating the business, you will need to decide what type of company you will create.

There are several decisions you will need to make when running a business with your spouse.

The options are a Partnership where each spouse will own a share, a Limited Liability Company (LLC) where each spouse will have a membership share or a Corporation where each spouse will be a shareholder. There are many tax considerations in these decisions.

The tax situation will be less confusing if one spouse is a company employee. The owner could set up the company as a sole proprietorship where there is less paperwork.

The employee's spouse can receive a regular paycheck with federal income tax, Social Security withheld, and credit based on their wages. If one spouse is an employee, they will pay income taxes based on their salary.

If both spouses own the business, they will pay taxes on the income from the business as the owners. Spouses who are business owners must also pay self-employment taxes based on their share of annual business income. Spouses who are owners of a corporation will pay taxes on dividends, and the corporation will pay tax on its income.

What Are Some Tips for Running a Business with Your Spouse?

Some guidelines will usually make running and growing a business with your spouse easier with less tension in the relationship:

• Commit to the business. This means effectively communicating with your spouse. Keep fully engaged and run the business as partners;
• Clearly define business roles. You need to identify and focus on the strengths and skills of each spouse in operating the business;
• Set some rules and boundaries. You must decide which spouse is in control of what area of the business, but be receptive to suggestions;
• Respect your spouse. There will be some conflict, but you must maintain the respect and trust of your spouse and keep all communication civil;
• Regular business meetings. You should hold routine company meetings to discuss plans and issues with daily operating procedures;
• Schedule breaks. All conservations can't be about the business all the time. Schedule family time and enjoy each other's company;
• Do the unexpected. Make an effort to surprise your spouse with an unexpected gift or dinner, as it's beneficial in any relationship.

It's not always easy to be the company boss and then an equal partner at home, but it's crucial to maintain respect and be open to suggestions from your spouse.

Running a business together should not be all work and no play. Try to keep the business concerns from ruining your personal time with your spouse.

Consider a Business Agreement in Writing

Before you decide to start a business with your spouse, it would be wise planning to draft an agreement along with your spouse and put it in writing.

Contact Furman & Zavatsky for more information.

If you decide that both spouses will own the business together, you should draft a partnership operating agreement. You should write up a shareholders' agreement if you set up a corporation.

If you share a business with your spouse, you should also have a separate buy-sell agreement prepared in advance in case of divorce. This could be included in a prenuptial or postnuptial agreement.

You should include details such as what happens if one spouse decides to leave the business and what happens in case of a spouse's death. If one spouse is a company employee, draft an agreement describing their pay and benefits.

Couples who follow set rules will have a better chance of business success, but you must agree on the “rules” first.  This must come from a mutual agreement that both spouses can live with. It won't always be easy.

Contact us to discuss legal options if you need more information or legal representation in a high-asset business owner divorce. Furman & Zavatsky are Los Angeles divorce and family law lawyers that represent people across California. We offer a free case evaluation by phone or complete the contact form.