When someone starts a business during their marriage, they may work on developing the company while their spouse works another job. This approach helps a household reduce the risk in an entrepreneurial start-up. There is another stream of income so that the family won’t be left without resources if the company fails or takes longer to turn a profit than initially expected.
However, couples sometimes decide to have both spouses play a role in the early stages of a business. You know each other well enough that you can potentially work together effectively, and your cooperative involvement in the startup process will mean that you both have an interest in seeing the business succeed.
Starting a company with your spouse can be an exciting and lucrative adventure, but it can also do damage to your relationship and leave the business itself more vulnerable than you might realize. Drafting two similar but significantly different documents can help you protect yourselves and the investment you want to make in this new company.
You need a partnership agreement
You can put into writing what each of you will do for the company and how you will be paid for the work you perform. You can also have plans in place in case you need to dissolve the company or have one spouse leave the business and go back to outside employment. Finally, having a conflict resolution plan in your partnership agreement is crucial, as otherwise disputes about your business could affect your marriage or vice versa.
You should probably draft a marital agreement as well
If you owned a complex and valuable asset before marriage, you would likely have considered protecting it with a prenuptial agreement. You will probably invest thousands of dollars of marital resources in the business, to say nothing of the time that both of you will commit to getting the company off the ground.
If you later decide to divorce, the end of your marriage could mean the destruction of your business unless you already have plans in place for that eventuality. A postnuptial agreement lets you decide now how to split your property and your business in the event of a divorce.
Couples that protect themselves contractually when starting a business can minimize how much damage the company might do to their family units and can also protect the investment they make in the business.
Proactively protecting yourself early in the business development process will reduce the likelihood that your business endeavors will fail or will negatively affect other aspects of your life.