Starting a business with your spouse or romantic partner can exist really exciting!

You might be thinking to yourself: 'who would be meliorate to commencement a business with than my meaning other?'

While it'southward like shooting fish in a barrel to get caught up in the fun of it all, it's important to consider what legals yous should have in place for the benefit of your business.

Unfortunately, not all relationships end in happily ever after. If you lot have the correct legals in place, you lot will exist able to have confidence that your concern volition stay adrift and go along at optimal capacity, despite any relationship breakdowns.

Read on to find out exactly what legals you should have in place when starting a business organisation with your pregnant other.

Choosing The Best Business organisation Structure

The first thing to consider is business construction.

Choosing the correct concern structure volition help set solid foundations for your business.

The 2 almost relevant concern structures are a partnership structure and a company structure.

Let's break them downward.

What Is A Partnership Construction?

A partnership structure will permit you and your spouse/partner to run your business together as 'partners'.

The pros of a partnership business structure include:

  • Information technology's easy to gear up up
  • It'south like shooting fish in a barrel to dissolve if you wish to end your business
  • Information technology comes with little administrative costs

The cons include:

  • The business is not a split up legal entity from you. This means that y'all can be personally liable for your actions or your partner'due south actions
  • It tin exist difficult to raise capital
  • If 1 of y'all wants to get out the concern, the partnership has to dissolve

Under a partnership structure, you should have a Partnership Agreement. This outlines the main concerns for your business, equally well every bit the structure of you and your spouse/partner's business organization relationship, how long you want the partnership to last for, and what happens when one of you wants to leave.

It is really important to have a Partnership Agreement in identify to optimise the functioning of your business and partnership.

If you call up a partnership business structure is all-time for yous and your spouses/partner's business concern, yous should:

  • Register a business proper noun
  • Register an Australian Business organization Name (ABN) and Taxation File Number (TFN)
  • Sign a Partnership Agreement

What Is A Company Construction?

A company structure volition allow you and your spouse/partner to be shareholders — completely separate from your business concern, which volition be its own legal entity.

As shareholders, you and your spouse/partner volition exist the legal owners and controllers of the company. This means that you can engage 'directors' to brand all of the decisions.

Yes, you lot can be both a shareholder and a director!

For more information on the stardom betwixt a shareholder and a director, Commonwealth of australia'due south corporate regulator, ASIC, explains it well here.

The most common type of visitor is a Proprietary Limited company. These are private companies and their liability is express by the value of their shares. This means that shareholders, being you and your spouse/partner, generally cannot be sued for any company mistakes.

Then, the pros of a company include:

  • Express liability
  • Protection from potential risks, keeping assets, acquirement and intellectual holding safe
  • Easy to raise uppercase

Some cons of a visitor construction include:

  • Information technology is not cheap. For example, ASIC takes an up front end fee for company registration

Under a company structure, you and your spouse/partner should have a legally bounden Shareholders Understanding in identify. This volition outline your business concern' goals and facilitate a structured relationship between you and fellow shareholders. More on this in a flake.

If y'all are thinking that a company construction is all-time for you and your spouse/partner's business, here is what you need to do:

  • Register an ABN, Australian Company Number (ACN) and a TFN
  • Sign a Shareholders Agreement betwixt you and your spouse/partner

For more information on the differences betwixt partnership and company structures, click here .

Determining what business construction all-time suits your business will assist inform what legal agreements you need to put in identify between yous and your spouse/partner.

Then, What Legal Agreements Should I Accept In Place?

Partnership Agreement

If a partnership business structure is most suitable to your business, you must accept a Partnership Understanding in place between you and your spouse/partner.

A Partnership Agreement will outline all of your main concerns for your concern equally well every bit the structure of you and your partner/spouse'southward business relationship.

A Partnership Understanding will generally accost:

  • The purpose of the partnership
  • How important decisions will be made
  • The class of activeness if your spouse/partner wants to leave
  • The responsibilities of you and your spouse/partner as co founders

Shareholders Agreement

If a company construction suits your concern all-time, a Shareholders Agreement between y'all and your spouse/partner is vital to the operating of your business.

A Shareholders Understanding will outline conclusion making processes and what will happen if your partner/spouse leaves the company.

A Shareholders Understanding may also address:

  • The responsibilities of you and your spouse/partner as co-founders
  • How shares are allocated
  • What shares can be issued and sold

Founders Term Canvas

Alternatively, you may cull to have a Founders Term Sheet in place. Despite non being a legally binding contract, a Founders Term Sheet is an 'agreement to concur'.

Typically, a Founders Term Canvas will:

  • Address ownership of the business
  • Outline how decisions are made
  • Talk over what happens when a co-founder wants to exit the business
  • Outline how disputes should exist handled

Having appropriate agreements in place is vital for the sustainability of your business organisation. If you lot've got a articulate agreement from the become go, you and your partner can easily empathize what roles you need to play and what volition happen if something goes wrong.

How Do You Brand Certain Your Roles Are Clear?

Ensuring that your roles are clear is extremely important to the success of your business and for preserving the relationship between you and your partner.

Having a conversation with your partner about your roles in the business is not plenty. It is crucial that your roles and responsibilities are put into writing.

Equally discussed higher up, the blazon of written understanding you have in place volition be dependent on what business structure y'all choose for your business. Whatever agreement this may exist, it volition help clearly define what roles both yous and your spouse/partner play in your business concern.

When determining what roles y'all and your partner play, information technology is important to consider:

  • Who will brand decisions?
  • What areas of the business volition each of you be responsible for?
  • How many hours volition each person piece of work on a regular basis?
  • If something goes wrong with the business, what will happen?
  • If something goes wrong with your human relationship, what will happen?

Communicating the above to your partner, putting it into writing and ultimately agreeing on terms will help make certain your roles in your business organisation are clear.

Exercise You Demand To Pay Yourselves?

In that location is no requirement that business owners have to pay themselves.

However, nigh concern owners certainly cull to. After all, beingness paid is an incentive to produce good work.

Yous may choose to pay yourselves in a number of ways. For instance, ane or both of you may become employees of the business and exist paid on a regular basis.

Whether you choose to pay or not pay yourselves, it is important to particular this in the relevant agreement between y'all and your partner.

Having a solid written agreement will avoid whatever conflict between you and your partner about your pay.

What If Your Relationship Breaks Downward?

Going through a relationship breakup tin exist tough.

It volition exist fifty-fifty tougher if yous and your ex spouse/partner have a concern together and don't accept the necessary legals in place.

This is why it is so important to take relevant written legal agreements in place between you lot and your spouse/partner when starting a business together.

Having an advisable agreement in identify volition brand information technology very clear what volition happen in the event of your relationship breaking down.

Need More Assist?

Starting a business with your spouse/partner can be really exciting.

But information technology is really of import y'all have the correct legals in place for the sustainability and benefit of your business.

It is vital you take an agreement in writing between you and your spouse/partner outlining exactly how you intend your business concern and business relationship to part.

Nosotros're hither to help! Reach out to our team for a free, no obligations conversation at team@sprintlaw.com.au or 1800 730 617.

Bella Duncan

Bella has feel in bazaar and large constabulary firms with particular interest in privacy and business organisation law. She is currently studying a double caste in Law and Psychology at Macquarie University.

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