10 Tips for Entering into Business with Friends and Family

1. Discuss Expectations

Communicate up front about roles, responsibilities, compensation, hours, decision-making, growth potential, and what happens if someone wants to exit the business and outline these discussions in writing.

2. Formalize the Business Structure

Create a formal business structure like an LLC or partnership by registering the business with the state.

3. Create a Business Plan

Write a business plan that describes your business goals, strategies, market analysis, management team, and financial projections.

4. Establish Financial Boundaries

Separate personal and business finances by opening a business bank account and tracking business expenses meticulously.

5. Communicate Regularly

Schedule regular meetings, both formal and informal, to discuss business matters, resolve conflicts, and make decisions, while being open and transparent in all communications.

6. Set Boundaries

Establish clear boundaries between work and personal life, respecting each other's time off and refraining from discussing business outside of designated hours.

7. Seek External Advice

Consider consulting with an attorney or business advisor to help structure the business effectively and mitigate potential risks.

8. Plan for Conflict Resolution

Establish a clear process for resolving conflicts amicably, such as through mediation or arbitration, and outline this process in your business agreement.

9. Review the Agreement Regularly

Review and update your business agreement as needed to reflect changes in circumstances or the business itself, ensuring that it remains aligned with your goals and expectations.

10. Exit Strategy

Plan for the possibility of a partner exit, including buyout options, succession plans, and dispute resolution mechanisms to ensure a smooth transition and protect the interests of all parties involved.