The Risks of Going into Business with Your Spouse

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Karen Elliott had the perfect job, but then she listened to her husband.

For five years, she worked as a department secretary at the New Mexico School for the Deaf, a position she loved. Then, one day, her husband expressed a desire to launch his own business selling vinyl designs that could be stuck on car windows and asked if she would join him. As Elliott recalled recently, “I said, ‘If this is what you want to do, then I’m all for it.’”

She quit her job and together they began working 60 hours a week to launch a business called Vet Expressions from the 36-foot RV trailer where they lived. They took all the necessary steps, incorporating the company and hiring someone to create and manage their business’s website. Yet, in a matter of months, both the company and the marriage began to go down in flames.

“We had the business and the marriage and our lives in that RV. So we never got away from each other,” she said. On top of that, Elliott’s husband proved to be a control freak. She claims he refused to listen to any of her ideas for improving the business and was a terrible business partner. “We had duties divided up at his direction. But even the duties that were assigned to me, he was never satisfied with and he was constantly looking over my shoulder and criticizing me.” Ultimately, the business failed within a year and the couple was divorced shortly thereafter. Now, all that’s left are a few of the company’s designs on her car that are just now beginning to peel off five years after the demise of their business and life together.

Elliott’s story is a case study in all that can go wrong when trying to launch a business with your spouse. It’s difficult enough to defend a relationship against the stress that comes from a normal family’s money worries, but that stress is only amplified when your spouse is also your business partner.

"Virtually all relationships are challenging, but when you add to a relationship the stress of a business partnership, there are just more opportunities for disagreements and stress to add to the mix,” said Beth Schoenfeldt, the co-founder of Collective-E.com, an online community for entrepreneurs. “Plus, there is just no way to escape when you both work, live and raise children together.”

Yet, for everything that can go wrong, many do try and make it work.

Will Stein moved to the U.S. in 1996 and met his future wife Rina the next year. After having only been married for six months, the couple decided to launch a high-end watch company called Philip Stein. Rina had worked in the watch business for years, but Will was a marketing man and for him the whole idea of running of a business with his new wife required a major adjustment.

“I’m the kind of guy who can leave the office and shut off my phone and have a private life, but my wife is more the kind of person who constantly thinks about the business,” Will explained. The Steins had to work on insulating their personal lives from their company, and force themselves to ban business talk from time to time to focus on their family. Yet, as Stein jokes, he lets his wife break these rules from time to time. “You know how women are; you always do what they want.” Today, the couple has managed to find a balance and their business has thrived because of it, with several of their products promoted by celebrities like Oprah and Madonna.

According to the U.S. Census Bureau, more than 3.6 million businesses in the U.S. were run by husband and wife teams as of 2002, and this phenomenon may actually be on the rise now. Last year, Americans launched more new businesses than at any other point in the past 14 years largely because of dismal employment prospects. Similarly, some have speculated that more couples are now teaming up to pursue this option.

In fact, Schoenfeldt has noticed that lately, more men are following Will Stein’s example and following their wives into a new business. “You might think that women are joining men in their business or they are starting them together, but what I am also seeing are women who have started successful businesses maybe on the side or while the husband was in a more traditional career, and have gained traction and men are coming aboard to take it to the next level.” Schoenfeldt attributes this new trend to the fact that men are having a more difficult time finding work (it’s not called a mancession for nothing) and therefore they are “putting their talents to work to benefit the family business.”

For those who are considering going down this path, Schoenfeldt recommends that you start by honestly evaluating your relationship to ensure that you have “open communication” and no tendency toward a “power struggle.” These two fundamental factors are arguably what distinguish Elliott’s failed business from that of Philip Stein. While Elliott’s husband refused to share responsibilities with her, the Steins quickly learned that this was necessary for their business to survive.

“In the beginning, when we were a smaller company, we both did the same work and sometimes did double the work because we’d disagree with how the other had done it,” he said. “Then we sat down, analyzed our strengths and weaknesses, and divided up the labor that way. After that it went much smoother.”

Beyond this, there’s also the concern that by going into business together, you are putting your family’s financial well-being in peril.

“All of your eggs are in one basket,” said Jim Grosspietsch who founded Studio G Interiors with his wife in 2005. “If the business runs low on cash, or worse, fails, you don't have your spouse's income to rely on as a safety net.”

According to Forbes, once couples do decide to take the plunge, they should consider hiring a “trusted third party” to handle some of the financial responsibilities of the business. “The quickest way to marital perdition is to get mired in money matters.”

On the other hand, you can expect some perks when going into business with your spouse. Joe and Shayna Willis founded the popular kids clothing line, CityThreads, nine years ago and have found that it is actually very conducive for raising a family. “We have a room at the office for our kids to be there with us. We get to warm bottles and send faxes at the same time. It’s definitely a unique experience,” Joe Willis said. The couple has even found the upside of having work seep into their personal lives. As Joe quips, “You never run out of dinner conversation.”

Ultimately though, for Joe and Shayna, like many of the small business owners we spoke to on this subject, the biggest concern is that running the company together could end up poisoning your marriage in the long run. “Our advice to other couples is not to let disagreements or arguments fester and of course, to try to make at least one day when you don't work and don't talk about it,” Joe said.

However, even if you have an excellent relationship, Schoenfeldt advises that couples discuss what will happen in the event that something goes wrong before they go into business together. “Make sure that you have an operating agreement just like you would with a non-spouse business partnership, and discuss an exit arrangement if the business side or the personal side of the business doesn't work out,” she said. “Think of it as a business pre-nup.”

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