Starting a new company with your spouse can be an exciting and rewarding adventure. Combining your personal and professional lives can strengthen your partnership and create a shared vision for your future. However, it’s important to approach this venture thoughtfully and only after considering how you’ll need to go about safeguarding both your personal and business interests.
For example, one of the most important decisions you’ll make when starting a new company is selecting an appropriate legal structure. Common options include sole proprietorships, partnerships, limited liability companies (LLCs) and corporations. Each structure has different implications concerning liability, taxes and decision-making authority.
For couples, an LLC or corporation often provides the best protection, as these structures can shield your personal assets from business liabilities. They also offer flexibility in managing the business and dividing ownership.
Next steps
Once you have a legal structure in mind, even if you and your spouse are in perfect agreement now, it’s essential to formalize your business relationship via a comprehensive partnership agreement. This agreement should outline each partner’s roles, responsibilities and decision-making authority within the business.
It should also address how profits and losses will be shared, how disputes will be resolved, etc. A well-drafted partnership agreement can prevent misunderstandings and provide a clear framework for managing the business, ensuring that both partners’ interests are protected.
Now that you’re starting a business with your spouse, it’s also worth considering a postnuptial agreement. This agreement can specifically address how the business and its assets will be handled in the event of a divorce. By outlining what will happen to the business in advance, you can avoid potential conflicts and better ensure that the business remains intact and functional, even if your personal relationship changes.
While no one likes to think about worst-case scenarios, it’s important to plan ahead. By putting a partnership agreement and a postnup in place, you and your spouse will both operate from strong positions in the event that something goes amiss in your business and/or your marriage.