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Being in a business partnership with a spouse can present challenges

Being in a business partnership with a spouse can present challenges

On behalf of Richard Murphy at Murphy Cordier Karber PLC

Many Arizonans who start a business decide to form a partnership to conduct the business. Inc. magazine observes that finding a second person to help build your business is not an easy task. It is suggested that a good business partner is one who shares your vision and enthusiasm and brings skills into the business which perhaps you do not have. It is fundamentally important to select a partner whom you believe that you can get along with. Sometimes, two spouses decide to create a business partnership.

A recent article published on the CNBC website notes that over a million businesses are jointly owned and operated by a husband and wife. However, partnering with a spouse needs to be carefully weighed out. Working together in a business day after day can place an added strain on a marriage. While there are no accurate statistics on what usually happens when spouses attempt to run a business together, one person interviewed by Inc. magazine suggested that less than 10 percent of couples can make an “all-in partnership work.”

The author of an article published in Forbes magazine suggests-with tongue in cheek-that successful couples in a business partnership get to write books on how to run a business successfully with their spouse. If unsuccessful, a “long-winded divorce” results, with the spouses battling over who did what and who deserves to get more.

If disputes and disagreements erupt between spouses as to how the business is being run, the continued existence of the business can be placed in jeopardy. In the Forbes magazine article it is advised that if you decide to become partners with your spouse, you first need to make sure that you have the following things in common with each other. First, there needs to be equal dedication to the business. Second, each person needs to occupy roles in the business suited for each other. Third, each person needs to have the same vision for the business. Finally, both spouses need to respect and trust each other.

CNBC offers the following tips on how spouses can best work together:

  • Do not compete with each other.
  • Set specific times to discuss business matters.
  • Do not be afraid to disagree.
  • Accept the fact that there will sometimes be disagreements but be prepared to deal with them politely.
  • Do not give up your personal life or limit family time for the sake of the business.

Partnership agreement

Small Business Trends magazine notes that, if you are entering into a partnership, you need to have a detailed written partnership agreement in place to deal with the inevitable issues and possible problems that may arise. This is true “even if your business partner is your spouse.” At a minimum, a partnership agreement should include the following:

  • Detail what each person is contributing in terms of labor, time, cash, property and customers.
  • Outline how profits will be distributed and whether each partner will be paid a salary for his or her role in the partnership.
  • Set forth precisely how decisions will be made.
  • Detail what happens to the business if a divorce occurs or if a partner dies, retires or just wants out of the business.

Seek legal counsel

Having a detailed written partnership agreement in place is always highly advantageous whether you are entering into a partnership with a stranger or a spouse. If you are considering entering into a partnership, you should contact an Arizona attorney who specializes in drafting partnership agreements.