If you’ve ever considered going into business with a friend or family member, you were probably advised against it. Nevertheless, some people do it, and for some, it works out well. It doesn’t matter who you are starting a company with — it could be your best friend, a family member or a complete stranger — you should always have sound legal documents in place. Having this conversation when everyone is optimistic and excited will make it easier to keep your relationships intact. Here are a few tips to think about before diving in head first. I hope you enjoy Cathy’s Tuesday Tip! ~Cathy
Establish Roles and Set Boundaries
Communication is key. Try to anticipate as many scenarios as possible and agree on how each should be handled. It’s crucial to make sure these roles make sense given each person’s interests and strengths. Talk through the worst-case scenarios and agree on how disputes will be resolved. Be honest, trust each other and use each other’s strengths to promote success.
Get Your Legal Documents in Order
Put an agreement together in writing and state what is agreed upon in the case that a partner chooses to leave the business or if a problem arises. Decide what type of business organization will suit your needs. Identify whether you want to set the business up as a partnership, a limited liability company, a corporation, etc. Research the difference between these structures and agree on the one that makes the most sense for your business. You should also talk to an attorney if another friend or family member wants to make an investment in the business, as this can complicate things.d
Discuss Time Commitment
Get clear on exactly the time, energy and financial commitments all parties are putting in. Future changes in those areas will impact your initial agreement. I’ve seen many cases where one co-founder starts spending the majority of their time on other projects. What will you do if this happens? What if one person needs to take on more outside work to support themselves?
Keep Work Separate
It’s important to make sure the business relationship does not get in the way of the personal relationship. Keep in mind that business is business and to keep it professional. Personal interactions should stay far away from the business. If everything is kept in a business-like fashion then the relationships with friends and family should remain unscathed. Remember to keep emotions calm and to discuss everything daily.
We have all heard the horror stories of father and son business partners causing a split in the family over a disagreement at work. How about a lifelong friendship ending over not seeing eye to eye? When going into business with a friend or family member, having clear and reasonable expectations and goals, communicating effectively and taking responsibility when things go wrong are all important steps to ensure the success of the business and the preservation of the relationship.
I hope you enjoyed Cathy’s Tuesday Tip this week. To view more of Cathy’s Tuesday Tips, visit our blog.