Business structure and concerns (spin off from Suhaila thread)

[AngelaDiCaprio]

I've been doing some pondering about the break-up of Suhaila's business partner/spouse and trusted employees. I'm sure there are mistakes in judgement on all sides of the parties involved, and I'm really not looking to place fault on any of their shoulders, but as a person who desires to have her own dance school some day and a hopefully successful dance career, I was wondering if we need to be careful when involving our spouses in our business affairs. Do we need to protect our assets from our spouse in case of a break-up? Are prenumtual agreements necessary? What about those we entrust to handle things while away? Is it best that they not be dancers and just hire managers? Where should we draw the line when it comes to our businesses and dance? Have some of us already set ourselves up for such disasters and if so can it be rectified before it comes to that point. If our spouse should leave us they get half of what we worked so hard to build?

Things to think about.

[Zumarrad]

It's an odd thing, because my parents have had shared finances and run a business together for ever and have never had any problems as a result, but there is no way under God's sun that I would ever involve family/partners/loved ones in a business venture. For me it's I earn this money, I take these financial risks, and if someone wants to stump me a handout if I'm really stuck and they mean it, then I will be eternally grateful, but I don't ever want to be in a situation where my dumb decisions could mean serious **** for other people, or, conversely, where someone I love could rip me off or otherwise hurt me.

It's weird, I know.

[Michelle75]

Huge question Luciana but a good one. I'm going to have to get my thoughts together on this before I respond. I love thought provoking issues.

[*maria*]

Thanks for the question Lucinia.
I need to put some thought into it also.
But for now:
I'm speaking in generalities :
I think mixing business and family/friends is most of the time, a bad decision.
Especially if you wrap up your family image in your business.
Then when things go bad, your business goes up in flames, and you almost have to build up again from the ground up.
I wouldn't go into business with a family member if someone handed me a million bucks.
I've tried it with friends a few times and it just doesnt work.
I rather go it alone.

[sabrinabellydancer]

there are ways to structure a business so that it is not a marital asset. incorporating or using an llc can also help protect your personal assets from liability claims. but this structuring should be done during the formation of the business.

you must check the laws in the state where you live and consult a lawyer and cpa. i think the costs are well worth it because prevention in the beginning of the business can save you major losses should your family have issues.

[kat]

there are ways to structure a business so that it is not a marital asset. incorporating or using an llc can also help protect your personal assets from liability claims. but this structuring should be done during the formation of the business.

you must check the laws in the state where you live and consult a lawyer and cpa. i think the costs are well worth it because prevention in the beginning of the business can save you major losses should your family have issues.

Sabrina is absolutely correct. The best way to protect yourself in a business venture -- no matter who is involved other than yourself -- is with good business set ups. When the other person involved is a spouse, contractual agreements which specifically address marital assets can go a long way to protecting one's interests in case the business booms and the marriage goes bust.

[Asim]

Well, a huge part of the problem is that we tend to wander into starting a business. It's hard to decouple our love for the form from the realities that making money create, and it's worse when it's wrapped up in love of someone else. It's ironic that a lot of people think they're heartless to run a business like a business. But, in reality, making your dance studio be a proper business means you make it run itself, and you protect your family and your assets much better.
Having been involved in business with family, I can say it's a major stressor on relationships. On top of the excellent advice to see a lawyer and/or CPA, the free services of the Small Business Association (in the US) can be of great help, and I'm surprised more dancers aren't taking advantage of their services.

[wigglewhiz]

Hmmm. I think I can speak as someone who had a narrow (and lucky) escape.

I wasn't in business in any kind of BIG fashion, but for a time (perhaps not so much now) I was fairly well known as an event organiser. I hosted haflas on a fairly large scale, I sponsored local and foreign teachers. My events were pretty big and although they all made a profit, all of the money got channeled right back into the next event.

It started as just an idea. We only had a couple of local haflas a year, and they were often sold-out. I theorised it would be great if we had more, but that it was only fair to put my £ where my gob was and do the work and take the risk myself, rather than wait for other teachers/dancers to do so. So I did. And since I was just starting out, my staff/helpers were my friends and family. In particular, I got a lot of admin support from my partner - who is now, of course, my ex.

I didn't ever get to the stage where I had a "business" as such. I wasn't registered or anything. But when the relationship sunk, my business went with it - I didn't have the support structure and I besides, I no longer had the desire to do anything anymore. The bubble was, most decidedly, burst.

Now fortunately, I had no busines asssets at the time of the split. My name isn't trademarked, but it IS mine and it's how I was known everywhere. Still is - look, I'm still here under it! ..l;, But if I was a bigger name... if I had business assets... if I was *worth* something... I'm pretty sure they'd have been some very, VERY dodgy stuff going on and he'd be after me for his cut. And it would have made a VERY difficult, awful, PAINFUL time even worse. AND would have cost me financially (in terms of litigation costs if not actually losing some money/rights from the business).

So, in short - I actually lost nothing and it didn't cost me anything. I was never married, so legally there would have been no issues. BUT, I consider it a massive warning sign, a great big red flag. I'm now teaching regular classes, and more workshops than ever before. I may never get back into the hafla/sponsoring business, but I may. And if I do, you better bet I will be DAMN careful how I structure it in future. I will never go into business with any boyfriend/partner/husband. It puts it's own stresses on the relationship,and the practical realities if all goes sour are just too much to think of.

Do bear in mind, though - I believe if you earn more than your partner through your own business, and you keep them in that style while you're together... you won't lose your business, but your assets will still be calculated for alimony. <sigh>

I hate relationship things. They're so... grubby. ,f::

[Emma]

I went to a seminar abour starting up a business just over a year ago. The advice we were given about starting up a partnership was: don't. Especially not with your spouse (not what the couple in front of me wanted to hear!). It's all too easy to start off thinking that because you're friends/family you'll always get along, but then if things go bad it can get very messy. There are ways around it, forming a limited liability partnership for example, and I'm sure there are lots of other legal things you can do to protect your interests. The emotional fallout from a breakup is bed enough without extra business-related hassle.

I agree with Asim: run your business like a business. There is plenty of advice out there.

[Michelle75]

Do we need to protect our assets from our spouse in case of a break-up? Are prenumtual agreements necessary?

If this is a business started after you have been in a realationship I think it would not be a big deal to speak with your spouse and tell them something along the lines of "I'm thinking of my businesses future and mine and I feel that some type of pre-nup in in order." To often we get caught up in the idea that our marriages will last FOREVER. Well, not today, they sure don't so I see nothing wrong with taking that extra step to protect that large investment.

What about those we entrust to handle things while away? Is it best that they not be dancers and just hire managers? Where should we draw the line when it comes to our businesses and dance?

Now, anyone you hire to WORK for you should have no legal say in how much money they get from you. If they aren't on the name of the business loan then why should they be entitled to a chunk of your blood sweat and tears. They are HIRED help. I'm not saying they don't work b/c they do BUT they know this going into the JOB. They should get a paycheck from you but shouldn't expect anything more.

I don't know of every states legalities so I could be full of sh*t in my posts above but that is how I feel on the matters.

[kat]

Now, anyone you hire to WORK for you should have no legal say in how much money they get from you. If they aren't on the name of the business loan then why should they be entitled to a chunk of your blood sweat and tears. They are HIRED help. I'm not saying they don't work b/c they do BUT they know this going into the JOB. They should get a paycheck from you but shouldn't expect anything more.

I agree with you Michelle -- but even this could depend on how employment contracts are written. If business is big enough to be either LLC, LLP, or even Inc., then it's big enough that employee contracts might be necessary. So back to Sabrina's advice: attorney and cpa -- you definitely need them! (Is there a smiley for "this could give one a headache"? )

[Bellydancingcaroline]

Well, I had always secretly envied people who had a partner or spouse behind them, making everything go. Everything I've ever done in my life, I've done myself. I am also blessed with friends who help me out (even if it's just advice), and occasionally my b/f will pitch in to do certain tasks. To compensate for lack of partner or spouse help, I will pay or barter to get help at times. So it turns out that all along I've been lucky huh?

[laura 2]

I used to work on an acount back in my advertising days that consisted of thousands of privately owned auto repair/tire shops across the country. Almost without exception, these mom & pop's were staffed by the owner's spouses and family members. It was not at all unusual to have dad owning the business, mom doing the books, sister in law answering the phones and cousin Timmy rotating the tires. And yes, it made my job very difficult sometimes. For example, I would call the owner to say that their ad was being cancelled because it wasn't paid for. He would respond that his wife told him she had written a check - was I calling his wife a LIAR????" Stuff like that would likely not happen if the bookeeper was just an employee, but when it's family, there's all this personal crap that mucks up the work.

That said, when you are a small business, it's hard to get stuff done *without* using your exisitng support systems, because they are ofthen willing to work for cheap or nothing. When you are skirting on the edge of breaking even every day, you just cannot afford to hire all these people. It's a real Catch-22.

[SamarDahab]

I've been thinking about this.

My boyfriend does event production and always has wanted me to take more of an active interest. I don't want to because I just feel like it's a bad idea for me to build his business when he's not my husband. I have a PR background and have offered to do press releases and such but i'm not going to work the door and hand out flyers and stuff. I just picture all those horrible stories of women answering phones to get their husband's office up and running and toil for years for him to only leave her in the end.

plus i have my dance stuff and all i expect from him is that he come to some of my shows.

i have started teaching and plan to also open a studio hopefully in the next year or two, and sell costumes etc. I was going to use my mom and aunt to help sell costumes or work tables at events since their retired. I was gonna pay them a comission. i would like to think i won't fall out with my Mother. I never really thought about what would happen with a husband but I guess I just feel like business should be separate. My business would be in my name and his in his name.
I hadn't really thought about structure because i'm starting so small. But this is really good to start thinking about what to do for the future. I will definitely talk to an attorney about it.

[CFerhat]

I think another thing to consider is, for the folks you might have working with/for you, where do your goals for them as employees, and their goals for themselves, intersect and/or diverge?

A lot of teachers hire the students around them, which seems very natural - the progression from one-person shop, to trading lessons for some services, to putting someone on the payroll. If the business stays small-scale, I think this works well, but if the business really takes off, it could create pressures for those students who now have important, and even critical, responsibilities in running the business. On the one hand, they are getting invaluable experience on running a business, on the other, if they really want to devote themselves to developing their own careers as dancers, this could be a tough situation. If I ever had a big dance studio to operate, I would want to have a very good understanding of my employees' professional goals, both inside and outside of that studio.

[SamarDahab]

agreed CFerhat. It can get kinda murky when you're trying to go out on your own. Often teachers don't like it because no matter how much they love you and want you to do well, they have invested alot of time in you and would love to keep you for good.

[kahaz]

I have an S corp for my dance business-Kahaz Productions. It was formed primarily because I put on large workshops and wanted to keep my "dance" money separate from my personal assets. Also, I wanted my hobby to pay for itself and this was the best way to keep track.

I'm married and have been for more than 20 years. Any financial undertaking that occurs for either one of us has to involve the other-at least legally. So, needing 3 officers for incorporation, we made him Chief Financial Officer. Not that he ever writes a check!

If our marriage falls apart, my small dance company (I also teach and perform) will be the least thing on my mind.

Kitty

[Zumarrad]

My boyfriend does event production and always has wanted me to take more of an active interest. I don't want to because I just feel like it's a bad idea for me to build his business when he's not my husband. I have a PR background and have offered to do press releases and such but i'm not going to work the door and hand out flyers and stuff. I just picture all those horrible stories of women answering phones to get their husband's office up and running and toil for years for him to only leave her in the end.

*nods*

I've known more than one such woman.