Husband and Wife Businesses

      Husband-and-wife business teams discuss how they choose a business structure, share and divide responsibilities, and stay organized. April 6, 2007

Question
My wife and I run our business (cabinet and furniture shop) together and we are trying to figure out the best way to classify the business. We just recently married and are not sure if we should keep it sole ownership or if she should be part owner. Also just wondering how other husband and wife teams share responsibilities.

Forum Responses
(Business and Management Forum)
From contributor S:
When I switched from a sole proprietor to an LLC, we put both our names down as owners without speaking with our accountant first. Even though I started the company before we married, in all reality we are both owners of the business. No way we would be here today without her total support and work, so I felt it only right to put her name on it. Well, only one problem with that. Even though you are married, it is still considered a "partnership," which changes your tax classification and accountant costs to file. So we decided to pull her name off and made me a sole member strictly for tax reasons.



From contributor D:
What state are you guys in? I'm just starting up and figuring out what kind of business I should file as. I was hoping LLC, but here in NC I read that you have to have more than one owner to have an LLC. I know I need to talk to an accountant, but I was just curious as to what your states require.


From the original questioner:
We are in located in Virginia. I am not completely sure on rules and regulations for having an LLC vs. sole ownership.


From contributor H:
Newly married and in business together? I wish you all the best of luck. It is a lucky couple who can not only love each other but work together also.

My accountant and my attorney explained it this way to me. As a small company, regardless of whether it’s LLC, S Corp, etc., when it is just the two of you and you personally do the work, anything you do can be seen as a personal action on your part.

The piercing of the corporate veil, whichever one, is extremely easy for any competent lawyer. Pay even one personal bill with company money and your company is now a proprietorship. Fail to have all the "board meetings" and you’re in the same boat. Until you have one or more employees, corporate protection of any kind is minimal.

You really need to consider if the paperwork and extra expense is worth it. What about workman’s comp? Unemployment insurance? They all must be paid on any corporate official.

My advice is to work as a sole proprietorship. Have your wife as a signer on your accounts. Have enough liability insurance. Isn’t that what you’re trying to do anyway? Protect yourself from any potential lawsuits.



From contributor Z:
You should talk to an attorney and an accountant. I think contributor H told you what they will say, but you need to seek the council of both professionals.

You also asked about sharing responsibilities. My bride and I work together on finishing, installs, and assembly. She's not comfortable with the machinery, so I do all the fabrication. She does all the glazing because I make a mess. I do all the spraying because she doesn't like the fumes. She's the better salesperson, particularly in helping the clients with stains, cabinet detail, layout, etc. Once they figure out how it all needs to be, I draw the job and make the cut list (usually in eCabs). I do all the ordering and manage the money. I probably ought to turn that part over to her.

I really don't understand why my wife hasn't shot me. She's patient beyond measure. Besides being shoulder to shoulder with me in this business, she's also a home schooling mom who's given me four beautiful children (28, 27, 10, and 8). Not a typo... I got the ages right. What can I say? We had a midlife crisis :-). I definitely married up.



From contributor K:
I switched my company to a LLC last year from just that of sole owner. While there are some costs involved in annual filing fees and the like, I still think it is the best idea. There is protection of personal assets and being covered by worker's comp is not a bad idea. In an LLC you are technically an employee of the corporation and thus covered. This past summer I fell in my shop and broke my left arm. All medical costs - surgery, hospital stay, physical therapy - paid for by worker's comp. Total cost to date exceeds $10000. And worker's comp pays me some every week while recovering. Not much, but helps keep the doors open. I have two employees and could not afford medical bills should one injure himself.

As to whether wife is included or not requires the advice of an attorney and accountant in your state. However, I believe a LLC is designed for one owner bypassing the normal corporate requirements of multiple board members. In this respect it could be one of the contributors to this thread is incorrect. LLC's were designed for sole proprietorships, thus allowing you, the founder and owner, corporate benefits and protections while maintaining your absolute control over your own company. Typically your tax returns merely look through the corporate cover and regard income and expenses as personal because they are filed on Schedule C and Schedule SE (self-employment tax) while granting protection for your personal assets. Ask your attorney, but here where I am there are no board meeting requirements for a LLC (because there are no board members) and paying personal expenses does not jeopardize your legal protections because LLC's do that.



From contributor B:
My neighbor makes a living advising small business owners on their options for the legal side of the business. Apparently it varies quite a bit by state. I will leave that portion of your question to the lawyers, accountants and more experienced.

As for working with your wife, my wife is my business partner too. She takes care of sales, including sketching all the designs and taking all the measurements. I put her designs and measurements into a computer-aided, builder-adjusted design (ecabs). She frequently runs the designs by me to check construction details and pricing. She normally picks up sheet goods, trim, finishing supplies, etc. I pick out most hardwood because it involves bouncing all the rough stock against drawings and actually handling the material rather than having the supplier pick it out. She also orders all the doors, drawer fronts, glass, hardware and anything else we need. On some occasions she will help with construction aspects, but usually just to spend some time with me. She doesn't actually assemble, cut, sand, etc. She will just help move things and sometimes stain. This arrangement works well for us. We have been in business for a year and married for nearly twenty.



From contributor A:
My wife and I have been working together for almost 22 years. We both design furniture, and do sales. She runs the front end mostly - accounting, ordering materials, shipping, etc. I program the CNC, work out the design details as far as assembly goes, and keep an eye on the shop. We have 6 employees, a bookkeeper and a dog. We use an accounting service and his advice so far was to not bother becoming a limited company. Although we do well, we don't make enough to make it worthwhile. Lately he has been hinting it might change soon.

On top of running our business, we are now building a house. It has been mostly just my wife and I building the entire house, nights and weekends. Our two sons help sometimes, and we have reached the electrical, plumbing, and insulating stage. We have been married 26 years now, and plan to keep it that way.



From contributor I:
I don't know if this still applies, but in some states you can be called a minority owned business if your wife is the owner. Don't know if you want any government work, but just something else to consider. When I was in business, my wife had the outside job to have benefits for us. Besides, it may have looked like the movie "War of the Roses" if we spent that much time together!


From contributor J:
My wife and I have worked together for the last 12 years. We have an S-corp. Works out well with taxes. Take a look at SBA on the net. They have a site with a page that compares all the different ways to form and it is in columns side by side for easy comparison. Or just call an SBA office and they will give you one. You can find your nearest office on the web.

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