Starting a business together can be the ultimate power couple move, but only if your relationship is strong enough to handle the ups and downs of entrepreneurship. If all goes well, you and your partner could build a successful business that grows over time — but ask yourself these questions before hopping into business together.
1. Are you able to separate work life and home life?
The early days of starting a business can be intense. You can expect long hours and plenty of challenges, and you’ll be working through these things with your business partner — who also happens to be your significant other. It’s easy for work stress to bleed into the relationship, and vice versa.
Before getting started, have a conversation about the types of boundaries you may need to establish early on. Maybe that means choosing a time each day to “clock out” and wrap up business talk. Similarly, you’ll want to be mindful not to bring relationship issues into your new workspace.
2. Can you clearly define your roles?
When starting a joint venture, it’s important to play to each other’s strengths. Early on, discuss who is better equipped to deal with specific tasks, including:
- Pitching to investors
- Day-to-day operations
- Marketing
- Human resources
- Payroll
- Securing and managing inventory
Disagreements could arise if you both want to do (or avoid) the same tasks. Making sure to define your roles and responsibilities up front can help you prevent unwanted conflict and pinpoint a strategy that works for your business and relationship.
3. What business entity makes the most sense?
The way your business is structured affects everything from the taxes you pay to your personal liability. It also spells out ownership details, which is important when starting a business with a spouse (or anyone you have a personal relationship with, for that matter). You and your partner will need to decide which business entity works the best for your business goals and relationship:
- General partnership: You and your partner will equally share ownership roles. There is unlimited personal liability, and you must pay personal tax and self-employment tax.
- Limited liability company (LLC): You and your partner will own the company equally, but you’re shielded from personal liability. That’s important if your business is ever sued. You’ll be responsible for self-employment tax and personal or corporate tax.
- C corporation: This can be a good option if you expect the business to grow quickly and go public in the near future. Owners, who are not personally liable, are responsible for paying corporate tax and personal tax on dividends.
- S corporation: This structure allows you to have up to 100 owners, all of whom are protected from personal liability. An S corp also allows you to avoid double taxation because you only pay personal tax (not corporate tax).
4. How will you fund the business?
You and your partner should clarify how much funding you actually need. Look at your expected startup costs, along with regular costs associated with operating the businesses. Your expenses may include:
- Rent or mortgage payments
- Utilities
- Licenses and permits
- Inventory
- Equipment
- Marketing costs
- Insurance
- Employee payroll
- Website costs
Your expenses can vary depending on whether you’re running a brick-and-mortar business or operating strictly online. Either way, you and your partner will want to discuss your funding options — and make sure you’re in agreement. If you’re both okay with giving up equity in exchange for funding, you might seek investors. That can be venture capital firms or individual investors.
You can also explore business loans or lines of credit. These have to be paid back, but you’ll retain full ownership of your company. Just keep in mind that having debt payments could affect your personal budget and create financial stress in your relationship.
Another option is to self-fund your business using personal savings or home equity. This can help you avoid debt and retain full ownership, but you run the risk of depleting your savings and net worth. That might impact your short- and long-term financial goals as a couple.
5. Do you agree on a marketing strategy?
It’s easy to overlook marketing, but it’s an important part of starting a business. Sit down with your partner to decide who will handle the task. The two of you may decide to tackle it together or designate it to one partner — or you might choose to outsource it to a marketing agency or independent consultant. According to the U.S. Small Business Administration, an effective marketing plan should be based on your unique goals and include:
- How you’ll measure your success
- The strategies you’ll use to achieve your marketing goals
- The resources you’ll need to carry out those strategies
- Clarity around how you’ll be reporting your progress
Your plan may include digital and print ads, social media marketing, content marketing, branding, email marketing, public relations and more. The goal is to attract new customers and build a loyal following. No matter what you choose, it’s important that you and your partner agree on how you’ll tell your brand’s story.
6. What are your long-term plans?
Connect with your partner about your long-term vision. Does this new business feel like a side project that’s more of a profitable hobby? Perhaps you envision it as a small local business that serves your community — or maybe you want to really scale the business and go public. Your business might also play a key role in your legacy planning. An estate planning attorney can help you iron out the details. That might involve passing the business onto your children when the time comes.
Starting a business with your partner can have a lot of moving parts. What matters most is getting on the same page when it comes to the important details. From there, the two of you can work together and make a plan for turning your idea into a profitable business. Keeping the lines of communication open can help you avoid conflict along the way.
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