It is said that Warren Buffett and Charlie Munger have been in partnership since the Sixties without need of a single document to record their respective rights and responsibilities as business partners. There are, no doubt, many reasons for the incredible success of their unbroken stand. Somewhere on that list might be the fact that Mr Buffett and Mr Munger have never been romantically attached…at least not to each other!

Cats and dogs

Any couple which sets up a business needs to ask one rather tricky question: what happens to the business if our relationship breaks down? For unmarried couples, the law can be particularly unfair. Witness the recent case of Pamela Curren and Brian Collins, an unmarried couple who ran a successful kennel and cattery company for many years. The business was in Mr Collins' sole name. When his relationship with Ms Curren fell apart, she was left penniless. Ms Curren thought the law would protect her (as it would to a great extent if they had been married). However, when an unmarried couple separates, the parties keep the assets that are in their respective names. In this case, the business and its premises, which included the family home, belonged, in law, to Mr Collins despite Ms Curren's contribution over the years. Ms Curren's reliance upon the trust of her partner gave her no legal redress. The bitterest pill was hers to swallow.

Playing it with a straight bat

The best advice for any couple that wants to set up in business is to write down who owns the business and how it should be run. They should record who will contribute what: whether it be cash, assets or blood, sweat and tears. If you establish your business as a company or a limited partnership, these rights and obligations can be set out in a shareholders' agreement or a members' agreement.

These documents can also make it clear what should happen to the business and its assets if the co-owners want to go their separate ways, whether as business partners or as life partners or both. Should the business break up? Should a trusted friend or advisor be brought in to keep the peace and prevent collapse? Should one half of the partnership bat on while the other reverts to a sleeping investor? Should one party buy out the other? A sensible agreement can help answer these questions.

Looking ahead, a couple which is in business together might want to attract some external investment. Any smart investor is going to want to see not only a successful business, but a sustainable one. A business with an unclear ownership structure and which is vulnerable to the consequences of a relationship break down will look unattractive.

The law relating to the assets of unmarried couples is not likely to change any time soon. Don't get yourself caught out.

This article by Richard Beavan originally appeared in FlyBe Magazine's May/June edition.