Starting a Partnership With a Spouse

If you are looking for a partner to start a business with, your first thought might be to start a business with your spouse. After all, you may (hopefully) already get along with and work well with your spouse, and he or she already may know the ins and outs of your possible business—as well as your personal professional strengths and weaknesses.

So if you do start a partnership with a spouse, you may be wondering whether or not you actually need a partnership agreement. After all, it’s your spouse—why have formal agreements limiting both of you?

You Are Both Owners

Bear in mind that if you do not have a partnership agreement, the default position will be under Florida law, that you are both owners of the company by tenants by the entireties (TBE). That means that neither one of you by yourselves owns the business, but rather, you and your spouse, as one collective unit, are sole owners of the business.

That can have some good benefits when it comes to asset and creditor protection; the business and its assets cannot be touched to collect on the debts of either spouse (now, partner of the business) individually.

What About a Partnership Agreement?

There may be a lessened need for a partnership agreement, because legally, there is no partnership—you and your wife are one person.

However, there still may be benefits to having a partnership agreement anyway—or at least, some document that resembles a partnership agreement, no matter what the formal title of the document is.

Your partnership agreement can help you with your business affairs, to the outside world.

For example, it can show legitimacy and stability in your dealings with creditors or contractors. A partnership agreement can help a married couple, should they opt to take on a business partner at a later date.

A partnership agreement can help you buy and sell property, and can help the company contract with outside people or companies, as the partnership agreement can say whose signature or approvals are needed on any specific documents.

The partnership agreement can detail when and how disputes get resolved, and when votes or voting is legally valid or required—again, even if you and your spouse are on the same page about these things, you need some document to tell the outside world that what the partnership has done, was done legally and validly.

No Tenancies by the Entireties

Of course, you don’t need to own the partnership as tenants by the entireties just because you are married. You can opt to just own a portion of the partnership individually, in which case you certainly do need a partnership agreement, for all the reasons that any other partnership would need one.

Handling Disputes

Remember that enforcement of a partnership agreement between spouses can get very difficult; courts generally won’t allow a husband to sue a wife. That means that your partnership agreement will operate more to set the guidelines of when and how the partnership can sue any outside person or contractor or company.

Thinking about starting a business with a spouse? Call the West Palm Beach business litigation attorney at Pike & Lustig today.

Source:

irs.gov/businesses/small-businesses-self-employed/married-couples-in-business