Starting a business with your spouse can be extremely difficult and stressful. That's why it's essential that you start off on the right foot.
Having a formal Business Partnership Agreement may not be romantic, but it's the best way to protect your relationship from the stress of running a business together.
With that in mind, here is what you need to know about having a Business Partnership with your spouse.
What is a Business Partnership?
A Business Partnership occurs when two or more individuals or entities decide to work together for a common commercial goal for profit for an indefinite length of time.
The Business Partnership Agreement is the document which sets out the key details of the business, including:
- The nature of the business
- Each partner's capital investment
- The role of each partner, including their rights and responsibilities
- What happens if the partnership breaks down
When it comes to businesses run by a husband and wife, the agreement is just as important as it would be for any other business. Nobody starts a business with their spouse and plans to have problems or disagreements, but it is a very real possibility that you need to be prepared for.
Why do you need a Business Partnership with your spouse?
You should always have a formal agreement whenever you go into business with another person, even if you are husband and wife.
Just because you are a couple, that doesn't mean that problems or disagreements won't arise while you're running the business together. A Business Partnership Agreement will help provide the tools to deal with disagreements in a constructive way so that they don't negatively impact on your relationship.
The last thing you want is for problems that arise in running your business to get in the way of your relationship with your spouse. Having a formal Business Partnership can help you keep your work lives separate from your personal lives.
You also need to consider what will happen to the business if you separate from your spouse. It may not be a situation you want to think about, but it's something you need to be prepared for when large assets and your livelihood are at stake.
How to set up a Business Partnership Agreement with your spouse
In most cases, a husband and wife Business Partnership starts without a formal agreement. However, it's essential that you create formal agreement if you plan for the business to be a primary source of income and not just a hobby.
Your Business Partnership Agreement needs to lay out the roles and responsibilities of you and your spouse so that it is clear how the business will run from day to day.
The things you need to consider include:
- Will all decisions be made jointly or will one or both of you have authority to make decisions for certain parts of the business?
- How will do deal with disagreements that arise while running the business?
- What happens if you or your spouse no longer wants to work on the business?
- What will happen to the business if your relationship breaks down and you separate?
Once you have discussed these issues and come to an agreement with your spouse, you need to have a business lawyer create a Business Partnership Agreement.
Get the right advice
If you're starting a business with your spouse, it's essential that you get the right legal and financial advice to give yourselves the best chance at success.
Make sure you speak to your accountant and get the help of a business lawyer to help you set up your Business Partnership Agreement.
For help with your business partnership, call the team at Rose Lawyers on 03 9878 5222.