Starting a business with your spouse

Last week we talked about going into business by yourself. However, many times starting a business by yourself is a lonely undertaking that you don’t want to do and finding a business partner can seem harder than finding a significant other. When looking for the perfect business partner, some people start to think that the person they have decided to share their (non-business) lives with would be the perfect match. What better person to go into business with than the person that you live with, possibly have children with, and want to spend the rest of your life with?

While sometimes this works, before going into business with your spouse, significant other, or life partner you really need to think about it. Relationships are stressful – adding on the dimension of being business partners in addition to life partners can make, or many times break, a relationship. You may have different ideas of the type of business to start, the way to run a business, or the way to handle the finances of a business. In addition, you have no separation between your personal life and your business life.

Legally, there can be additional issues to tackle. When setting up a business owned by a married couple, discussions need to take place about what will happen to the business if the couple gets divorced, how the business will be financed, and how the business will be treated for estate planning purposes. If there is another party also in the business, even more careful planning needs to take place to make sure the business isn’t disrupted if there is martial disharmony between two of the owners that will affect the other (non-married) owners.

Tax-wise, when a business is going to be owned by a married couple, there may be different options for the tax treatment of the business. For instance, the couple may decide only to have one owner and be treated as a sole proprietorship, may decide to be treated as a partnership, or may elect for c-corporation or s-corporation status (setting up the appropriate legal entity for the type of tax entity selected of course). Discussions with the couples’ CPA to determine what tax treatment is best for the business are essential and should include tax planning and estate planning discussions.

If the business is owned by a couple who is not legally married (even if the couple is engaged and planning on being married), then the business should be set up just as a business would be between two partners who were not romantically involved. With a legally married couple, should the couple decide that they no longer want to be involved with one another, typically the couple is headed to divorce which means the splitting of the assets would be handled during the divorce. However, if a couple is not married, then if the couple decides to separate, the assets would be divided as decided by contract or by a court. In most cases, it is easier to decide how you would want assets split when you are still friendly (i.e. when setting up the business), rather than waiting until you want nothing to do with the other person. In addition, non-married couples need to have estate planning done to ensure that the person they intend to get the business actually does as the default rules for non-married couples are different than married couples. Again, a discussion with a CPA is needed to determine the tax treatment of the entity also.

Putting the legal issues to the back burner, opening a business is stressful emotionally and financially. Having one person in a relationship become self-employed can put a strain on a relationship. Having both people in a relationship become self-employed at the same time can be devastating if the business is not financially successful. Many times, even if a couple both want to start a business, one may want to consider staying at a paying job until the business is up and running. These are things a couple will want to discuss to make sure they are really ready to take the plunge before they do it.

If you have any questions about starting a small business with your significant other, please feel free to call me, your Denver business lawyer, at 720-258-6647 today!

About Elizabeth Lewis
Elizabeth Lewis is a small business attorney, mother of two, and owner of the Law Office of E.C. Lewis, PC. She works with small businesses from start up to dissolution and everything in between. In addition to running her law firm, she teaches small business owners throughout the state at various business groups, is part of the Colorado Bar Association's Business Law Section, and several chambers. Legal Background Following the advice that she has given hundreds, Denver Business Attorney Elizabeth Lewis became a small business owner in January of 2010. She opened the doors to her own law firm, the Law Office of E.C. Lewis, P.C. which specializes in business, intellectual property, technology, and online law. Prior to starting her own business law firm, she worked for the Law Firm of David A. Sprecace, P.C., where she developed the firm’s business and technology law practice. She also has extensive experience in these fields from working under the lead attorney at the CU Technology Transfer Office where she wrote licensing, non-compete, employment, and business contracts. IT Background Prior to attending CU Law School, Elizabeth worked at Experian, one of the largest credit bureaus in the country providing IT support as part of the email-marketing department. She holds a Masters of Science in Computer Information Technology, gained while working in system administration prior to law school. She continues to be active in the IT community by attending conferences, classes, and events to learn about new technology before it hits the internet. Education Elizabeth Lewis is a native of Denver, Colorado. She has attended Holy Family High School, Metropolitan State College of Denver (Bachelor of Arts), and Regis University (Masters of Science). She received her Juris Doctorate from the University of Colorado Law School and continues her legal education taking Continuing Legal Education classes from the Colorado Bar Association and Denver Bar Association on a regular basis. Additional Activities Elizabeth regularly participates in the Denver Bar Association and Colorado Bar Association. She recently was named the head of the e-Commerce Section of the Business Law Section, Colorado Bar Association. Elizabeth is active in her community and hold memberships with the Fax Partnership, South Metro Chamber of Commerce, Glendale Chamber of Commerce, Colorado Bar Association, and Denver Bar Association. She teaches regularly at locations throughout the Front Range. In her free time, she loves spending time with her family which includes her husband, two sons, and dog and enjoying all that her home state has to offer, including hiking, biking, enjoying over 300 days of sunshine a year, and most recently crossfit.

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