Bloodline Only or Do We Involve Spouses?

There is no right answer or best practice that works for every family enterprise when it comes to the role of spouses or partners in the family enterprise, so I have tried to present the strongest arguments I can find on both sides.

Those in favour of spouses and partners becoming owners of a family business would argue the following points.

• Ownership provides financial security for a spouse, especially when this represents a significant part of the family’s wealth.

• Transfer of ownership to spouses creates options for more tax efficient planning.

• Spouses diversify and strengthen the ownership base and including them communicates a strong signal about being part of the family and the business. 

• As parents of the next generation, spouses are more likely to pass on positive messages about the business to the next generation.

• In the event of relationship breakdown, a spouse should automatically transfer their ownership back to the bloodline family member.

Those in favour of limiting ownership to bloodline family members would retort as follows.

• Ownership might provide a relatively modest return, especially if there is a custodian attitude to ownership.

• There are alternative ways to protect the financial security of spouses, for example life insurance.

• Transfers to spouses creates more minority interests for the company to manage.

• Spouses could dilute the sense of familiness rather than strengthen it.

• Inclusion can be addressed through spouses being involved in other aspects of governance, such as a family council.

• Family tension may be caused if some family members transfer ownership to their respective spouses while others do not.

• In the event of relationship breakdown there will always be scope for dispute over valuation and the provisions requiring automatic transfer back to the bloodline.