Eliza Kendall and her husband, Ron, might seem like an unlikely pair. Raised in affluent Darien, Connecticut, as the daughter of a corporate executive, she studied business administration in college and rode horses in her free time. Ron, who came from a blue-collar family, was working as a fisherman when they met through a friend on Cape Cod. She wasn’t interested in romance at first, but Ron pursued her. “He persisted; brought the lilacs,” she says. “He knew something I didn’t know.”
The Kendalls, now both 55, got married in 1985 and have been together ever since, raising two children together. Along the way, they’ve also worked together, initially in a concierge and event-planning business she started in 1990, and now in ElizaJ, a supplier of portable restrooms on Cape Cod that she bought in 1996. In planning outdoor weddings and other events, Kendall discovered it was hard to find decent portable restrooms. She decided to offer a pristine alternative, with her own line of amenities and fresh flower sprays. “I said, `I’m going to take them from Motel 6 to The Ritz-Carlton,’” she recalls. Ron joined the company full-time after she won a bet that she could create a business where he’d make more money than he did in his family’s asphalt paving business, where he worked after they got married.
Today the company operates six months out of the year and brings in six-figure revenues from weddings and events for clients like private equity firm Bain & Co. Kendall has begun franchising, with locations planned in Colorado and Idaho. She says working with her husband was the right decision. While she loves sales, she admits, “I can barely screw a light bulb into a lamp. He’s wonderful with delivery and setup.”
Many couples are joining the Kendalls in what’s known as “copreneurship.” The U.S. Census Bureau’s 2007 Survey of Business Owners, the most recent one available, found 3.7 million businesses jointly owned by married couples. Among them, 1.4 million said the husband and wife had an equal role, 1.7 million were run mainly by the husband, and 598,094 were operated mostly by the wife.
If your own business is taking off, hiring your mate may be smart. “The upside of working with a spouse is that, fundamentally, you have the same goals,” says wealth manager Lance Drucker, president and owner of Drucker Financial Group in New York City. “You’re looking to grow the business to grow your net worth.”
Then again, family businesses can be full of conflicts that other types of firms don’t face. If your marriage has hit a rough patch, going into business together probably won’t bring you closer—and could heighten tensions. And dissolving a marriage and business partnership at the same time is doubly fraught.
Here are some questions to ask yourself if you’re considering hiring or working with your mate:
Why does it make sense? Does your partner have an expertise or talent you can use? Is it to give your spouse something to do? Is it going to help your marriage? It’s important–for both of you–to discuss these issues before you hire your spouse, advises Drucker. If you need your accountant husband to manage your finances but he wants to help you with marketing, you will drive each other crazy.
Are your skills complementary? While shared passions may draw you together in a marriage, they may drive you apart in a business. By many accounts, the couples with the best business partnerships tend to have very different skill sets that balance each other. “If you’re both analytical people, why do you need each other?” Drucker asks. To grow his own business, Drucker hired a husband-and-wife team of business consultants. The wife, a former attorney with a warm personality, had strong coaching skills, while the husband’s strengths leaned toward organizational aspects and finances. Drucker found them “phenomenal.”
Remember to create a clear division of labor, so you—and your clients and employees– understand who’s in charge of what. It’s also important to discuss how you’ll handle financial aspects of the arrangement. Some spouses may be fine with volunteering in your business, while others may want a salary.
What’s your time frame? Is your spouse just helping out for a while, or is he a permanent hire? There’s nothing wrong with hiring your spouse as a temp, but discuss your expectations to avoid misunderstandings. With their two children in college, Drucker, 49, asked his wife, Beth, 50, to help with client outreach several days a week for about 8 months last year—and found it enriched his marriage. “She got a sense of what I do and how I do it,” he says. “She was able to see me in a different fashion.” Then she moved on to other pursuits—with his blessing. “We rescued two black lab puppies, and that ended that,” he says.
Bill Mullen, 75, hired his wife Carole, 62, for a part-time job handling the paperwork for his financial planning business in Park City, Utah, 17 years ago, not long after they embarked on what is now a 25-year second marriage for both. Mullen doesn’t plan to retire. “As long as my brain works and my health is good, I plan on continuing to work,” he says. However, he’s prepared for the possibility that Carole may want to free more time for interests like arts and crafts and decorating. If that happens, he is prepared to hire another part-timer to replace her. With their adult children spread out around the country in varied industries, Mullen has worked out a succession plan in which he will transfer his clients to a similar firm in the area if he ever wants to close up shop. “It would be a very smooth transaction,” he says.
What are the financial implications? As Mullen points out, adding your spouse to the payroll, even if it’s on the company’s board of directors, may enable you to include your mate in the company retirement plan—and vastly increase your savings. He and Carole use the individual 401(k), available only to individual owners or individual owners and spouses. This type of 401(k) lets each contributor sock away $17,000 for 2012—or up to $22,500 by year’s end if they are both over 50. If, say, an owner pays his spouse $22,500 for the year, it counts as a business deduction—and the spouse owes no taxes on the income, he explains. Employing your spouse may also enable you to add your mate to the company’s health insurance plan, notes Mullen. It may also help your spouse earn higher Social Security payments, since starting to collect this benefit later results in bigger checks.
Of course, financial considerations aren’t the most important part of hiring a spouse. It’s important to take the pulse of your working relationship frequently—as you would with any other employee. There’s nothing wrong with realizing that it’s better to keep your business and personal lives separate.
Elaine Pofeldt is a co-founder of the $200KFreelancer, a site that aims to help independent professionals make a good living.