Many people dream of starting a business. And, for some, a spouse or significant other is the ideal business partner. The prospect of building an enterprise with the person they share other parts of their lives with may be appealing on a number of levels from shared passion, convenience and common goals. However, it’s important to approach the joint venture with the same care a person would apply to any other business dealings.
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If you are thinking about starting a business with your significant other or have already started the process, here are 5 tips to help you maintain your financial priorities on the road to success:
1. Agree to individual and shared responsibilities. Small business owners wear many hats to achieve their goals. Come to an understanding about how you will divide and conquer the many demands of business ownership. Establish a process for decision making. It’s also important to discuss how much time and money you are each willing to contribute to get your business up and running.
2. Don’t overextend yourselves. You’ve likely heard of entrepreneurs who have built wildly successful companies by maxing out their credit cards. This is rarely the best way to advance your business. Avoid high-interest-rate debt and be careful how much money you put on the line. Discuss and document how much each of you invests and how debt will be repaid.
3. Purchase business insurance. The goal of insurance is to protect you and your partner from financial loss if something goes wrong. The types of insurance you buy will depend on the nature of your business. You may be required to hold specific insurance for the work you produce. For example, if you borrow money to purchase inventory, your lender may require insurance against theft or loss of that inventory.
4. Have a contingency plan. Consider all possibilities and plan accordingly. For example, if one of you wants or needs to return to the workforce, how will the business go forward? What if your romantic relationship changes? It would be unfortunate to be forced to dissolve a company if one of you wants to leave it. Consult a legal professional to create a binding agreement regarding exit plans. You will appreciate the peace of mind knowing there is a way out that is fair to both of you, just in case.
5. Continue to save for your retirement. When you’re self-employed, you are the boss of your financial future, including your retirement accounts – all the more reason to make monthly or annual contributions to tax-advantaged retirement savings accounts. Enlist the help of a financial advisor to keep your personal finances on track. Your business also deserves financial and tax planning advice on a regular basis.
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