In the early 2000s, research showed that three million of the 22 million small businesses in the United States were owned by married couples. This number would have gone up by now. Or, it might have dwindled depending on whether these couples stayed together or not. But with statistics pointing out that 42% of marriages end up in a divorce, it is highly unlikely that many of those couples who owned a small business in the early 2000s are still together now. Well, who knows? Miracles do happen, right?
Doing business with your spouse is not a problem if you are 100% sure you are going to stay together for the rest of your lives. But who really knows when marriage will end, right? There is no formula to making a marriage work other than what you usually hear from speeches and interviews and watch on TV. The truth is that businesses tend to get vulnerable when an imminent separation is on the horizon. The best way to manage a business when you’re married is to divorce-proof a business.
How It Is Possible to Be Couple-preneurs
It is possible to be entrepreneurs together as long as you define the limitations of your personal and professional relationships. Consider divorce in the future. Yes, it is hard to think about separating in the future when you’re just beginning your life together. Still, it is practical to consider how to divide assets in a divorce when you’re entering a business as a couple. This understanding is a great foundation for your business’ future.
Once you pass the hurdle of admitting that there are no guarantees in marriage, you should begin working on your relationship. Marriages are never rosy, more so when you plan to grow a business together. Marriages are stressful, often leaving you exhausted with little energy left over other things in your life.
But when you plan to run a business together, you have to achieve balance. A strong marriage foundation will bring balance to your relationship, whether as a married couple or as business partners. So before you invest in anything, maintain a harmonious relationship at home.
Legalizing Business Arrangement
Create a business arrangement with your lawyer. You can choose between a shareholder agreement or a partnership agreement. These will protect your business in case of a divorce. How should the business arrangement look like? The agreement, above all, should include the asset contribution, role expectations, distribution of profits, exit strategies (if one of you wants to leave), and resolution of business disputes in case of personal differences.
These agreements will ensure that both of you stick to your roles. Many entrepreneurs find it hard to work with their spouses because they don’t know the scope and limitations of their roles. An agreement will see to it that both parties understand their respective responsibilities in the business. And in case of a divorce in the future, that agreement will serve as a basis in the division or liquidation of the assets or a potential buyout from one of the spouses.
Separate Your Personal and Business Finances
Even solo entrepreneurs have a hard time when their finances are in disarray. Make sure to have separate accounts for these as much as it is tempting to manage just one account for all business and personal transactions. Remember that when it comes down to it, your taxes will also suffer when you don’t separate your finances, too.
Mixing your finances will complicate your business taxes and income. Untangling these will be an awful mess even for the most seasoned accountant and tax lawyer. And if, later on, you decide to divorce, separating these will be more complex.
Drawing up a Prenuptial or Postnuptial Agreement
You can either draw up a prenuptial or a postnuptial agreement. The purpose of this agreement is to have a well-defined means of dividing the assets the couple earned over the course of their marriage. Make sure that the agreement is in line with the existing legislation in your state, so arguments over them can be eradicated when and if you decide to separate. An agreement such as this will also keep the legal cost of a divorce down. Since there is a basis for how the personal and business assets will be divided, arguments and protests will be kept to a minimum.
It is not easy to think about divorce when you’re head over heels for your new business venture. But the reality is that marriages end in the most unexpected of ways. Most of the time, it’s the couple’s finances and business shares that bear the brunt.