Partnering in business, as well as in life, is possible. How? By starting a marital business, a special type of business that has different characteristics than other businesses and that, precisely because of its peculiarities, requires ad hoc ways of creation and management.
If you’re thinking about starting such a business, you’ve come to the right place: in this guide you’ll find out what a marital business is and how to run it successfully.
What is the marital enterprise
The definition of a marital enterprise refers to a business that is operated equally by both spouses, regardless of whether it was established before or after the marriage. To better understand what a marital enterprise in Italy is, however, it is necessary to refer to Article 177 of the Civil Code, which is its legal basis.
Definition and legal basis
Article 177 of the Civil Code regulates “community of property” and indicates that the objects of community of property also include “businesses managed by both spouses and established after marriage.” The same article, a little later, specifies that, “in the case of businesses belonging to one of the spouses before the marriage but managed by both, the communion concerns only the profits and increments.”
A marital enterprise is, therefore, a business run equally by both spouses, but within this category it is necessary to distinguish two cases.
A marital business on marital enterprise occurs when the business is managed by both spouses and was established after the marriage. In this case, both spouses are to be considered entrepreneurs and managers of the business. Its administration and legal representation, therefore, are vested in the spouses severally with respect to acts of ordinary administration and jointly with respect to acts of extraordinary administration.
A marital business on non-marital enterprise, on the other hand, occurs when the business operated by both spouses belonged to one of them before the marriage. In this case, as pointed out just now, only the profits and increments of the business and not the ownership of the business are subject to legal community.
Differences between marital and family business
It is important not to confuse marital business with family business, which is instead governed by Article 230 bis of the Civil Code.
Family business is the form that a sole proprietorship can take when family members of the entrepreneur collaborate in it.
It is precisely the role of family members that distinguishes the spousal business from the family business: in the former, in fact, the two spouses run the business equally, while in the latter case the employees (which may include, precisely, a spouse) have subordinate duties to the owner.
Not only that: in the marital enterprise, both spouses have equal benefits, regardless of their actual participation in the management of the business, while in the family business, the participation of employees is proportional to the quantity and quality of work they perform.
In the family business, moreover, the owner is responsible for decisions on day-to-day management, while in some cases a majority of the members is required.
Creation and management
The marital enterprise – by now it will be clear to you – has some of its peculiar characteristics. Some of them refer to its creation and management.
Starting a marital enterprise
A marital enterprise must be established by spouses only, and therefore anyone else must be excluded from its creation. Such an enterprise also does not have to be established by public deed.
Accountability and shared administration
In addition to equal rights, spouses running a marital business have equal duties to third parties. Each spouse may perform any act concerning administration, ordinary and extraordinary, with the exception of dispositive acts involving real estate and registered movable property, for which the consent of both is required instead.
Legal and tax aspects
Knowing the legal and tax aspects when deciding to start a business is important and even more so in this particular case.
Regime of communion and separation of property
We have already mentioned this, but it is important to reiterate what are the implications under the law of a marital joint venture.
Meanwhile, it is useful to recall that legal community of property represents the family property regime provided by law for couples married or united by civil rite, except in cases where the spouses explicitly express a choice in favor of separation of property. Legal communion provides that property acquired during marriage is common to both spouses, even if only one of them acquired it. Disposing of joint property always requires the consent of both.
Article 177 of the Civil Code, as already pointed out, states that the legal community of property also covers businesses managed by both spouses and established after marriage. The same article further clarifies that, “in the case of businesses belonging to one of the spouses prior to marriage but managed by both, the community of property concerns only the profits and increments.”
Tax implications for spouses
For tax purposes, if the business is established before the marriage and is run by both spouses, the income is to be declared by the spouse who owns the business on the income tax form PF, under RF (ordinary accounting) or RG (simplified accounting), while the other spouse declares his or her share of the income under RH of the income tax form PF.
If the business run by both spouses is established after the marriage, it is treated as a partnership and, therefore, the income should be declared on the income tax form SP and allocated pro rata between the spouses, who will have to fill out the RH box of the income tax form PF.
Marital enterprise: benefits and challenges
Now that we have clarified all the technical and legal aspects involved in setting up a marital business, it is time to understand why to start such a company (and why, if at all, not to).
Benefits of marital enterprise
We start with a quote from Shannon Alder:
“In a marital enterprise, marriage is the foundation, love is the cement, and commitment is the building.”
Love represents, if possible, the greatest advantage for marital enterprises. Being able to trust 100 percent of those working alongside you has several benefits: for example, it makes the work environment more peaceful and nurtures the spirit of cooperation within it, ensuring a greater willingness to sacrifice on everyone’s part. From a practical point of view, working with your spouse also allows you to avoid having to deal with the complex and time-consuming process of evaluating and referring potential employees.
Common challenges and how to overcome them
Working with those you love, however, is a double-edged sword: misunderstandings can arise between spouses as well, and their consequences can also have very serious repercussions, because the boundary between work and private life is very blurred, and managing work-life balance is even more complicated.
Among other possible disadvantages of marital enterprises, the issue of skills stands out: working with one’s spouse could hold back the company’s growth and innovation because contributions from external, perhaps more qualified, resources are always very important. To cope with this, it is necessary to analyze each person’s strengths and added value as objectively as possible, without sentimental implications.
Strategies for success
We can only end this guide devoted to how to successfully run a spousal business with some broad outlines of the most effective strategies for making such a business make the most of its success.
Effective cooperation between spouses
The first strategy is a natural consequence of what was said earlier about the bond that unites two spouses who decide to work together in the company: the collaboration must be such that it takes advantage of all the opportunities that such a relationship offers (i.e., first and foremost, the trust placed in the other) and averts the risks to which it exposes (work-life balance management in the lead).
Beware of misunderstandings and quarrels, which could lead – as a last resort – even to divorce (and, therefore, to the end of the marital enterprise and its tax benefits): in this sense, the advice is to make sure that the collaboration is truly equal and that the tasks of each are clear and shared from the beginning.
Financial planning and forecasting
To run a marital enterprise successfully, one must also be very careful about managing finances: as with tasks and roles, goals (financial as well as strategic) and expense management must also be shared by both spouses. The best strategy here is to put together a comprehensive and clear financial plan for everyone to serve as the basis for the success of the marital enterprise.
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