Starting a Business with Your Spouse: Good or Bad Idea?

Starting a Business with Your Spouse: Good or Bad Idea?

Entrepreneurs often wonder if starting a business with your spouse as a partner in the new venture is a good idea. A Washington Post profile of entrepreneurial couples offered these words of advice for those considering turning a personal partnership into a business one:

Accept that there is no such thing as a work/life balance. Couples who go into business together say that work becomes your life, and you both must be committed to doing what it takes to make the business work.

Divide and conquer. Identify your individual strengths and apportion business responsibilities accordingly. Then don’t tread on each other’s turf.

Talk about it. Have an open dialogue with your spouse every day so you can keep on track to achieving your goals.

Carve out personal time. Create rules for when you will engage in “shop talk” and when you will focus on family.

Be each other’s best advocate. Realize you have chosen to be in this together and are committed to making your venture successful as a couple, not just two individuals.

Hire great people. Take some of the pressure off yourselves by surrounding yourselves with great people who can help you be successful.

Respect your differences. It is inevitable that there will be disagreements on how to reach your goals; learn to respect your different ways of making the journey.

Legal and Tax Considerations for Business Spouses

It has been estimated that almost one-third of family businesses in the U.S. are owned by spouses. The business structure you choose for your company will determine how it is taxed. If you choose to operate as an unincorporated business that is jointly owned, the IRS classifies this as a partnership. Business income is reported on Form 1065, U.S. Return of Partnership Income.

Spousal joint ventures can also qualify as sole proprietorships under the Small Business and Work Opportunity Tax Act of 2007. Under this law, each spouse must report a share of business income, losses, deductions and credits separately. To qualify as a sole proprietorship, a business owned by spouses must meet these conditions:

• The husband and wife owners must be the only members of the joint venture and file a joint tax return.
• Both husband and wife must participate in the business.
• Both husband and wife agree not to be treated as a partnership.

However, the preferred business structure for spouses who jointly own a business is one that provides liability protection. By creating a separate business identity, you shield yourself from any liabilities such as debt or legal liability of the business.  If the business goes into bankruptcy, you will not.

Forming an LLC and organizing one are two different things, and while the formalities of formation are fairly basic, you should consult with a Florida business attorney to help you organize your LLC.

A qualified business attorney can anticipate potential problems before they arise and help with the more complex features of LLCs, including operating agreements, taxation and advising owners on securities laws when selling shares to raise capital for the LLC. Contact one of the experienced Florida business attorneys at Jurado & Farshchian, P.L., at (305) 921-0440, or email us at info@jflawfirm.com.

 

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