Considerations for Partnerships Between Spouses

Your spouse is, hopefully, your partner, in every sense of the word. But it does happen, that we want to make our spouse more than just a life or relationship partner—we want him or her to also be a business partner. This can be a great idea, but it is always a good idea to understand the possible legal issues that arise, when spouses go into a partnership together.

Benefits of a Partnership Agreement

Many partnerships start, without the drafting of a comprehensive partnership agreement. And because the idea of a governing document may seem distasteful because it is your husband or wife who you are going into business with, many married couples often forgo or overlook the necessity to draft a partnership agreement.

Don’t think of the partnership agreement as a contract between you and your spouse—it is not that. A partnership agreement should more be thought of as a document that will help the partnership itself, and which will tell the outside world, and courts, and employees, and everybody else, what your partnership does and how it operates.

You Need an Agreement

You actually may need a partnership agreement, whether you want one or not. That’s because as married husband and wife, you are presumed to own any property—including your partnership—as what is known as tenants in common—not as legal business partners. If you want the status as separate legal business partners, you’ll need an agreement saying that.

The partnership agreement can have other benefits. Opening business bank accounts, getting loans, or filing or defending against legal actions, all can (and should) be done in the name of the partnership, with a partnership agreement.

Dividing Profits and Losses

Many people in their marriage don’t see property, assets or funds, as owned by one or the other spouse. They see everything as jointly owned by both. But in any business, including a partnership, it is important to separate the assets, expenditures, profits, or investments, made by husband and wife business partners.

In other words, any payments made from the partnership to any partner, should be made only  to that partner and that one only. Any expenditure made by a partner to help the partnership, should be documented.

If your partnership agreement says that one partner will be paid differently than the other, you should stick with this and make sure that your records reflect payments in accordance with what the partnership agreement says.

Dispute Resolution

In a marriage, business disputes can be very difficult to resolve. But if there are only the two partners, the partnership can end up stymied, without the ability to move forward, if conflicts can’t be resolved.

You surely don’t want to (and legally may not be able to) litigate a partnership dispute against your own spouse. That makes inclusion of alternative dispute resolution methods, like mediation or arbitration, even more important than they would normally be for a partnership that doesn’t involve a married couple.

Questions about your partnership, or starting one? Call our Fort Lauderdale business litigation lawyers at Sweeney Law P.A. at 954-440-3993 for help.

Sources:

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

fortune.com/2023/02/14/married-entrepreneurs-starting-business-together/