There are many sayings about mixing friends and money, but perhaps this American proverb captures it best—“Before borrowing money from a friend, decide which you need most.” When moving from friendship to family, the stakes are even higher. When marrying into a family business, you have to consider the legal considerations.
Life transitions come with stress. With the right evaluation and wise counsel to assist you, you should not have to choose between love and money. You can marry into the family business with the knowledge that you have the information you need to protect yourself, your new partner, and the business that matters to both of you.
Power Dynamics in Relationships
You are not alone in this journey. According to the U.S. Small Business Administration (SBA), 27.3% of all businesses in the most recent reporting year were family-owned. Family and business both come with power dynamics that are important for you to consider.
You must consider not only your relationships with your partner and their family but also your partner’s relationships with their family.
Think about how the following factors will impact your experience as a new partner—in romance and in finance:
Communication Styles
How does each family member discuss the business? Are options for individuals without official duties still part of the operational decisions? You will want to understand how any individual’s desire to communicate about their actions may impact how things work. Power dynamics in the family may not be reflected in the business operations, but it is also possible that the influence in one mirrors the other.
Resolving Conflicts
How are disagreements handled? Are there controls in place—potentially a third party who can mediate disputes? It’s vital to expect family conflicts from even the most harmonious group and establish methods for resolving issues. Doing so can prevent impacts to the business and the other way around, keeping family interactions peaceful.
Official Structure
Is the business properly registered with your state? You should be clear on how the business is structured as described by the Texas Secretary of State and verify what position, title, or other benefits you may receive when you marry. Ask questions about how the company operates, who makes decisions, and who is ultimately liable for successes and failures. Once you have these answers, you should be sure you understand what roles you and your partner will have.
The Future
Many mom-and-pop businesses are exactly that: two parents who start a company that grows to include adult children, new spouses, and grandchildren. There may be a tendency to do things “the way we always have,” yet changing family membership and dynamics often force critical conversations and decisions. Most importantly, the business should always include well-thought-out plans for both adding and subtracting new members to the family.
Divorce, as well as marriage, can substantially change how a company operates, especially when dividing ownership shares or board seats. If there is already a plan in place, how does it address your new position in the family, and what does the plan say about what happens if you leave?
Work-Life Balance
Marrying into the family business brings a whole new dimension to the term work-life balance. Try to understand how much you and your partner will be bringing home at the end of every workday. You must consider not only the monetary impact, but the emotional effect on your new marital relationship and interactions with relatives.
Prenuptial Agreements
If you will work for the family business or give up a career to support your partner in their work for the business, it may not be simple to document the investment you are building. Changing the agreements in place will necessarily impact other family members, and they may not support such an action. To protect your future, you may want to consider a prenuptial agreement that captures what you’re providing in concrete terms.
These contracts also protect the business’ interest by providing clear lines surrounding the division of marital assets that include (or do not include) business ownership. A recent Harris Poll shows that prenuptial agreements are growing in popularity and have become recognized as important contracts. Yet, they still carry the stigma that the couple is anticipating the failure of their marital union.
If you can move past the negative connotations and evaluate your present circumstance, you, your partner, and your new family may find such a contract valuable. When marrying into a family business, a marital agreement and the clarity it brings can be an important part of securing your shared future.
Are All Your Family Eggs in One Basket?
Another item for consideration is that marrying into the family business may mean a lack of diversification. If the family business faces challenging times, will your own immediate family suffer? Any time both members of a marriage work in the same business, there is a chance that the couple can end up without employment and the benefits that come with it.
When your entire income is at risk, and all benefits are tied to the same source, you may want to consider an emergency fund that is a bit larger than the typical family savings. There is an additional risk of bringing work disagreements home and arguments about your personal life to work. In addition to having other family members involved in your home life, such discontent can negatively impact your work environment.
There are also solid advantages to sharing a home and workplace with the person you love.
Having your family at work means it might be easier to coordinate your schedules, which can create a shared sense of purpose. With extra care, you can separate the workplace and your home, so your work-life balance remains strong.
The First Word in “Family Business” Is Still “Family”
In the end, you need to approach marrying into a family business with care so your mixing of love and money results in a lifetime of romantic and financial riches. A Houston business lawyer from Feldman & Feldman understands both family and business law and can help you navigate this next phase of life for you and your partner. Contact us to arrange a consultation and learn more about how we can help you with your new business endeavors.