It depends. Do you like your friends? That seems a bit harsh, but honestly it can be very difficult to go into business with a friend and remain friends. It seems a natural, easy progression from friends to business partners, and at first glance there can seem to be no lines at all. What could be better than doing something your love with someone you love spending time with, right?
There are lines however, and when they are crossed, either the friendship, partnership, or both will struggle.
Does struggle mean they will crash and burn? Not necessarily, but one or both can if the two involved are not careful to prevent it. It isn’t guaranteed the friendship or the business will suffer, but precautions should be taken on the front end.
The key is to be prepared legally and emotionally. How does this happen?
Get an Attorney Involved
This is a no brainer for most partnerships, but sometimes when friends are involved they feel that, due to the friendship, formalities are not necessary. This is a mistake that could be fatal to the business and the friendship.
See an attorney and do everything by the book. Become a formal partnership, and write up all the details of how the business will be run in the contract.
The contract can relieve pressure on the friendship by putting in writing those details that can sometimes cause friction. Decide on the front end who will make what decisions, what the decisions making process will be, and how duties, profit, and debt will be split. Once decided, get it in writing and signed by both parties.
Friction can happen at this point in the process too of course, but by getting it out of the way before the business is started, it will cause less damage than it could otherwise. This is also a chance that the friends will recognize at this point that they should not run a business together. If that is the case, though disappointing, it is better to find out sooner rather than later.
Have and Exit Strategy
A clear exit plan for both parties is needed. If one party decides to leave the partnership, they should be able to follow the steps laid out in the contract so that the business and the friendship can be preserved. This could include buy-out options, financing strategies, and other necessary details.
What is comes down to is this. No one wants to lose a friendship, and no one wants to lose a business. Take steps before hand to protect both, so that you and your partner can each enjoy running the business together.
Biz2Credit is here to help you each step of the way, from the time you first start your partnership through growth phases, and through buy-out if that time comes. Our network of lenders has startup loans, equipment financing, small business lines of credit, as well as other small business financing products to fit most any need. Visit Biz2Credit.com today to see what we have to offer and to get started.