Thinking about going into business with a friend or family member? The first thing you need to do is establish the terms of your relationship.
First, determine who will do what. Is the relationship equal in terms of contributions? Is it equal in terms of who will do the work? Who will make the business decisions? If both partners make decisions, who will break a "tie" if there is a stalemate?
If you will form a LLC for your business, you need to have in place an Operating Agreement. That is the document where you will write down all of these answers and establish all the basics of your relationship. A business relationship is similar to a marriage. In the beginning, everyone is starry eyed and enthusiastic. Over time, resentments may build and damage the relationship. Similar to a prenup, the Operating Agreement will dictate what happens if someone wants out.
Ok, maybe enemies are not the logical choice as business partners, but sometimes it can be easier than doing business with friends.
Going into business with friends always sounds like a great idea. You would get to work with someone you like, have fun and bounce ideas off one another. However, going into a business with a friend opens up complex and sometimes conflicting personality traits and viewpoints.
Before you go into business with a friend, make sure you hash out all the important details, like who is going to contribute how much money and what assets to the business, how much of the business each person owns, what happens if there is a disagreement or someone wants to leave the business. Thinking about these things before doing business or setting one up can save you a lot of headaches down the road and prevent you from wishing you did business with your enemies instead!
Sarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way. When you're looking for a business lawyer near you, we offer several convenient locations.