My last two posts discussed the personal and the tax and legal considerations regarding being in business with your spouse. This post is about a third set of issues that come into play when you have employees and/or investors to consider.
The issues may seem subtle, even hard to imagine now, but when they occur they are very palpable. One that´s not difficult to imagine is that the marriage or the business can´t withstand the stresses. Clearly, being in business with one´s spouse isn´t for everyone. But let´s assume for the moment that you and your spouse will continue to get along amicably when you are running your business. With just the two of you, the dynamics are complicated enough. Now think about bringing employees or investors into the picture.
Employees may perceive, legitimately or not, that the employee spouse receives favoritism and access to more information than they have. Be aware that there could be overt or hidden dissatisfaction on the part of the outside employees. Tom Evslin, who I quoted in the Part #1 post on Spouses as Business Partners, says, "Debate is important to a functioning executive team and it is harder on the other execs when the CEO´s spouse is also a team member — not impossible, just harder."
In order to avoid appearing to show favoritism toward your spouse, you could unconsciously favor the perspective of outside employees to the extent that you downplay your spouse´s perfectly valid recommendations. Quoting Tom Evslin again: "I found myself (I was the CEO in this business) trying so hard not to appear to favor Mary that her ideas and plans got less support than those of everyone else."
Another perspective from Evslin is that "Ma and Pa isn´t scalable.", at least it wasn´t for him and his wife, Mary. They found that they worked together well in start-up mode, but when it was time for the business to grow, they needed to get out of the way. Think about whether your vision is for your company to grow beyond start-up scale.
Are you going to have employees at the outset? Then prepare right away for how you can maintain a fair work environment. Even if there will just be the two of you initially, it is important that you discuss now how your business relationship may change when you expand.
Lastly, you need to be aware that venture capitalists and other investors, for all the preceding reasons, have a strong bias against spouse-owned businesses, so you´ll almost certainly need to be able to bootstrap your business.