Partnerships: Husband And Wife
From LoveToKnow Business
Partnerships: husband and wife; sadly, bliss may be lacking while the relationship destructs. Not only are there dual liability issues concerning money and operations, there may be a more lasting one. Some husband and wife partnerships end up in divorce court with marriages irrevocably destroyed.
Backgrounds May Not Be Enough
Part of the reason partnerships with a husband and wife develop problems and fail is that they lack a formal partnership agreement going in. It’s just naturally assumed that each spouse’s role will complement the other. But this may not always be the case.
Just because Joe is a sales superstar at ABC Corporation seething to set out on his own and make his mark in the world, doesn’t mean that Joe has the brains or ability to handle all the details of the everyday business operations.
And just because Mary happens to be able to balance the checkbook, raise the kids, deal with schools and do all the tasks Joe never had time for or interest in, doesn’t mean that she can run the day-to-day operations alone, while Joe is off playing super salesman. Most business decisions require two minds instead of one. Nor can you assume that Mary or Joe will be able employee managers.
What Can You Do?
At the very least, with family limited partnerships you need an agreement in writing that both of you sign before venturing into the deal. That way, should things get bad later on, you can hold a sit down, assuming you’re still talking, and iron out the things that aren’t going well. If this doesn't work, try counseling. If all else fails you can dissolve the partnership altogether recognizing that a business dissolution is far better than a marriage dissolution.
Or better still, you can both enroll in business courses at a local university to gain the knowledge you need and fill the skill gaps you both lack. As you advance in your studies, it will soon become apparent who has a better handle on what. Strengths will be discovered. As will weaknesses.
Try A Limited Partnership Trial Run
Sometimes a trial basis will quickly reveal if you can work together. Keep the business home-based while you enter a discovery phase. If one spouse thinks he or she has better ideas than the other despite lacking direct business experience or knowledge, the trial period may be a short one. Agreeing to work together and being able to are widely separate issues. Hidden personality traits can get magnified incredibly fast when you spend 24/7/365 with your spouse/partner with no respite.
Business Problems with Partnerships: Husband and Wife
Not to mention that when you go home at the end of the day you still carry the business with you and any unresolved issues that are fast turning into resentments and regrets. Coming home doesn’t leave the business outside. It comes with you, as do all the financial, time and other challenges straining your relationship.
The Business Can Thrive While Your Marriage...
This doesn’t mean that the business always suffers. In many cases, partnerships with husbands and wives can even flourish because of a crack squad of capable employees doing what they can to make the business work. Trust that any problems you have with your family limited partnership’s spouse, will be quickly known among the troops. Expect that there will be some division on their part, as they side with one or the other partner, hoping that their hero wins out and that their jobs are secure. Know that your marital strife will be communicated to your vendors and customers.
Happy Endings
It's only when two partners discover who they really are and grow comfortable in one another’s abilities and strengths that the business can thrive. Husband and wife family limited partnerships aren’t always fatal. When they work, they tend to get stronger over time.
So, should you be considering the same idea, take a close look at who you are and what you offer to the partnership and relationship before you make a costly commitment.
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Comments
Hi Terri,
It depends on how the business is set up. If one spouse is an employee in an employer/employee of relationship and the first spouse significantly runs the business and makes management decisions while the other spouse works under the first spouse, then the employee spouse is subject to income tax and FICA withholding.
On the other hand, if both spouses have an equal say, provide equal services and contribute capital to run the business, then this type of partnership relationship should be reported on Form 1065, U.S. Return of Partnership Income. If spouses support a business and share in the profits and losses, they are partners in a partnership whether or not they have a formal partnership agreement. However, a partnership agreement define things legally and help to sort things out in the event the marriage relationship is dissolved or one of the partners dies.
And thanks for pointing out that typo. I've fixed it.
-- Contributed by: Donna SundbladSometimes a trail basis will quickly reveal if you can work together.
You have a spelling error: Trail should be trial!
Also what type of partnership agreement should be used for a H/W who need to get health insurance(because me the W does not make enough money yet)and the H is retired going back to school, looking for a math teaching position.
-- Contributed by: TerriYes, it can be very rewarding. It's a lot of hard work, and working through the rough spots together can actually draw two people closer together instead of brooding on problems at the office that a spouse cannot relate to.
-- Contributed by: Donna SundbladThis page has been accessed 1,832 times. This page was last modified 02:35, 3 March 2008.
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