After years of being a loyal employee, you’ve decided to take the leap and go it alone. Your dream has always been to form your own company. You have a plan, you’ve looked into the startup costs, and it turns out you’re going to need a little help to get started.
You’re considering asking a close family member to join you. You trust them, you respect each other and have one another’s best interests at heart. Who better to go into business with?
Are there any other factors to consider? Can a family business partnership work?
Who owns what?
One of the first decisions you need to make is what share of the business you each own. This could come down to numerous things. Who had the idea in the first place? How much startup money is each party putting in? Will one of you work full-time, while the other is only around for two days per week? Ownership percentages are something you need to be very clear about from the beginning.
What roles and responsibilities will each party have?
What does each of you bring to the table? Perhaps your family member is a number cruncher, while your strength lies in getting people motivated. You need to think about the partnership rationally, separate your personal relationship, and focus on what strengths each owner has, as well as any weaknesses
What’s the plan for disagreements?
Very few business partnerships have no disagreements whatsoever, whether or not the business is family-owned. This is something you should prepare for, rather than letting it catch you off guard. In your partnership agreement, you may want to include dispute resolution procedures. This can prevent you and a loved one from getting into a lengthy legal battle, leaving your relationship in disrepair.
Running a family business is certainly a challenge, but there is no reason you can’t make it a success. Make sure you are fully aware of your legal options before taking your next step.