Academic journal article Journal of Financial Counseling and Planning

The Intermingling of Family and Business Financial Resources: Understanding the Copreneurial Couple

Academic journal article Journal of Financial Counseling and Planning

The Intermingling of Family and Business Financial Resources: Understanding the Copreneurial Couple

Article excerpt

Couples who share a personal relationship and a business are referred to as copreneurs. This study compared the financial intermingling behaviors of copreneurial and noncopreneurial family business owners using the 1997 and 2000 panels of the National Family Business Survey (NFBS). Copreneurs (n = 211) intermingled financial resources more often than noncopreneurs (n = 462). Business property secured loans to meet family needs while family assets and household income were used for business needs. Viewing success over time, the use of the home as collateral increased business profit while using business cash for the family decreased the feeling of success. Couples that transitioned to copreneurs status during those 3 years were less likely to intermingle than on-going or discontinued copreneurial couples. Understanding what triggers intermingling by professionals can assist in supporting copreneurs.

Key Words: copreneur, family business, financial intermingling

Developing a solid financial plan and determining if a system is reaching its financial goals requires an understanding of where a system, family or business, or both obtains its income and spends its money. In order to do that, authors recommend that there be a clear trail of funds entering (receipts) and exiting (expenses) a system (Ingram, Albright, Baldwin, & Hill, 2001; Rittenberg, Martens, & Landes, 2007; Tyson, 1994). Without a clear financial picture, whether for the family's internal financial manager, an external accountant, or a financial advisor/ counselor, accurate forecasting, decision making, and planning are difficult. Such discrepancies make it difficult for the outside professional to offer specific suggestions in helping the system, whether it is a family or a family business, improve its financial position (Burns & McCullough, 2001).

For many families within the United States, the flow of resources, both financial and nonfinancial, is tied to the family's ownership and participation in a family business. Astrachan and Shanker (2003), Heck and Stafford (2001), and Heck and Scannell Trent (1999) have all estimated that approximately 14% of households in the United States own at least one family business. This percentage represents 8 to 10 million businesses. Within that segment, 30% of these enterprises are comprised of husbands and wives in business together (Fitzgerald & Muske, 2002; Muske, Fitzgerald, & Haynes, 2003). This represents a significant number of businesses where the couple has decided to blend both their personal and professional relationships. The numbers of businesses defined as "copreneurial" does vary as Muske and Fitzgerald (2006) noted. Their research found couples, while remaining together, were dynamic as copreneurs. Sometimes they worked as a business team and met the definition of being copreneurs, while at other times they changed their working relationship and were no longer considered a coprenerial business.

The finding of Muske and Fitgerald (2006) supported the idea of separate but joined systems in the group of businesses defined as a family business. Similarly, Zuiker et al. (2002) identified interdependence between the family and business systems, while Haynes, Walker, Rowe, and Hong (1999) reported that financial intermingling was a significant issue for family businesses. Muske, Fitzgerald, and Haynes (2003) further established that copreneurs had a greater likelihood of intermingling financial resources than did family businesses in general. The idea of linkages or shared resources makes it difficult for counselors and planners to, as a 2006 National Endowment for Financial Education report encouraged, work with clients "where they are" (p. 76). If intermingling of financial resources does exist and occurs frequently, financial counselors and planners need to understand the types of resources intermingled as well as how often such intermingling occurs. However, it is unclear in the literature as to the frequency and type of intermingling found as well as how intermingling may influence success of the business over time. …

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