They’re called “mom-and-pops” for a reason. But while many couples do start a business together, not all of them go about it the right way.
“It happens on Main St. every day: A business is started by a married couple, and then they split up and need to think about their biggest asset, that they’ve poured a lifetime of work into,” says Charley Moore, founder and executive chairman of online legal service Rocket Lawyer. He says the company’s 40 million users download more than 40,000 legal documents each day, with much of the activity revolving around starting a business.
Based on professional and personal experience (Moore started Rocket Lawyer with his wife), here are his tips for starting a business with your partner.
No. 1: Divide up roles.
“The first thing is to establish who’s in what role, and the fact of the matter is that it is usually not 50/50,” says Moore. “Establishing up front that [one person] is the boss and the other is in a supporting role can alleviate some crisis situations.”
No. 2: Put everything in writing.
Moore recommends that all founders, and especially romantic partners or spouses, write a charter for the company. This exercise will clarify the nature of each person’s role and make it more definitive.
No. 3: Get a prenup (or a postnup).
A successful business is a significant asset, and should the business outlast the marriage, ownership could get called into question.
“You want to decide what is separate property [and what is shared],” says Moore. “If you’re starting a business and your future spouse will have a minimal role, you’re best off establishing that as a separate property in a premarital agreement.”
An agreement doesn’t have to mean writing your future spouse out of the business’s future altogether, however.
“You can say that 80% of the business is my separate property and 20% is for the community estate,” says Moore.
No. 4: Start thinking about succession plans early.
“As your business grows, more people will depend on the business besides you and your partner,” says Moore. While it may seem premature to think about succession planning before your business takes off, Moore says it’s a smart thing to do.
“You may not want your spouse to succeed you [as CEO]. You may want the business to pass to another relative, for example,” says Moore.
No. 5: Be transparent.
In the event the romance doesn’t work out, you may find yourself in a position where you still need to work together, says Moore. In this case, his best piece of advice is to be transparent, and ethical.
“You can’t make any big changes during divorce proceedings, like changing the business model or cutting prices so revenue goes down, or appointing a new love interest to the board,” says Moore. He says these are red flags in court that can turn divorces into even messier and more costly affairs.
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