Advice For Going Into Business With Family Or Friends

3 minute read

Man woman shaking hands

There’s debate about whether going into business with friends and family is the most advisable idea. Nevertheless, some people do it, and for some it works out well.

Here are some things to consider:

Set Goals And Expectations

The goals of the partnership and the business should be clearly laid out. Get together and decide what you want to accomplish as well as everyone’s roles in the company. It’s crucial to make sure these roles make sense given each person’s interests and strengths.

It’s just as important to address any and all concerns upfront to make sure everything is mutually acceptable. Try to anticipate as many eventualities as possible and agree how each would be handled. Don’t strong-arm and don’t be strong-armed.

Put Things In Writing

This seems so obvious, but not everyone does it. It’s critical to have agreements put on paper from the onset. Talk to an attorney about creating a legally binding document.

For example, you may agree that if you put up X amount of money, you get X amount of the profits, etc. Also agree on how issues will be resolved if things go south. No one wants to think about the possibility of the ship sinking before its maiden voyage, but it’s something that needs to be planned for, just in case. And it’s much less contentious to do that before the fact rather than during or after.

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.

Decide On The Structure Of The Business

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.

Keep Work Separate

It’s important to not let the business relationship get in the way of the personal relationship and vice versa. It’s also important to not let the business relationship get too lackadaisical. This is another potential risk when going into business with friends and family. They might think they have significantly more leeway to do what they want than you think they should, and you may have very little leverage over them. Again, this is why it’s important to establish expectations from the beginning and put things in writing.

Have Reasonable Expectations And Be Honest With Yourself

As with anything, it’s good to have reasonable expectations. You should know your friends and family well enough to know whether you can reasonably make a partnership with them work.

For example, if you know your zany aunt marches to the beat of her own drummer, it’s not reasonable to expect anything will be different just because responsibilities become attached. For the most part, people are who they are, often even when the situation asks them to be different.

There May Be No Going Back

A botched business venture may ruin, or at least strain, your relationship with your friend or family member. Even if you view the failure as water under the bridge, they may not. They may also think you owe them something, even though investing in a business should reasonably be viewed as a gamble for all involved parties.

Know That Things Can’t Be Unseen

If the saying “you don’t really know someone until you live with them” is true, it’s probably also true that you don’t really know someone until you go into business with them. It can be an eye-opening experience. If you think your friend or family member is nearly perfect, you might find out otherwise, and you might wish you hadn’t. On the other hand, your respect for them might grow if you learn they are a competent and dedicated businessperson.

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.

This article was syndicated from Business 2 Community: Advice For Going Into Business With Family Or Friends

More Business & Finance articles from Business 2 Community: