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Issues to consider before starting a company with friends or family (or even strangers)

Posted by Bernard Dietz | Mar 19, 2013 | 0 Comments

Many entrepreneurs consider or actually do go into business with friends, family members, or even people they don't know so well.  Having multiple owners can be reassuring, can provide access to needed skills or finances, and can make running your own business more fun.  However, it is important to think through all of the potential issues you can have with “partners” so that there is less of a chance of a bad outcome or perhaps a ruined friendship.  Before going into business with anyone, consider these 5 questions:

1.  Do all of the potential owners have the same goals for the business and expectations?

2.  Do you have the same work ethic?

3. Do you have complementary skills and agree on what each person's respective roles will be in the business?

4.  Do all of the potential owners agree on how business decisions will be made?  What will you do to settle any disagreements?

5.  Does everyone involve trust each other and is there mutual respect among everyone?

Of course, the five questions above are just a starting point for things to consider before going into business with someone else (or many someone else's) but are a good start.

Remember, the more issues you can pre-decide in your Operating Agreement (for an LLC) or a stockholder's agreement (for a corporation), the easier your life will be if issues between owners arise.

About the Author

Bernard Dietz

Bernie Dietz is a Virginia lawyer and Virginia business attorney with more than 15 years of experience as both an attorney and a business executive, which gives him a unique view into the special needs of small to medium sized businesses. He has worked in business development, sales, and marketin...

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