Starting a business can be a frightening, but exciting, experience people rarely do alone. Most business owners require support, encouragement and contributions from others to get the business off the ground. This is why many people often decide to start a business with a friend.
However, for all the benefits that can come with starting a business with a friend, there are also drawbacks that can jeopardize both the business and the friendship. To avoid this, there are some important steps you can take at the beginning of your professional pursuit.
- Define your roles early on. While you may both be involved in virtually every step of getting the business running, discuss how you plan to eventually separate responsibilities. As this Mashable article notes, defining roles early on can help prevent confusion and complications.
- Decide how you will resolve your disputes. It could be very helpful to set some boundaries regarding dispute resolution from the beginning when you are both thinking positively and on the same page. You might decide to have a voting system in place, or divvy up decision-making authority based on areas of expertise. You might also consider defining the chosen method of dispute resolution you will pursue if you cannot solve a disagreement yourselves, like mediation or arbitration.
- Have an exit strategy. If one or both of you chooses to or is forced to leave the business, decide on how that should happen. You can outline these plans in a document like a shareholder agreement.
- Don’t rely on informal agreements. There will be plenty of times that your unspoken bonds, familiarity and friendship with each other is going to be of great benefit, but do not forget that this is also an experience with considerable financial, legal and professional stakes. As such, make sure you have valid, enforceable agreements in place that provide a solid foundation for your business.
We also encourage readers who are thinking of starting a business with a friend to consult an attorney for legal guidance. Doing so can help you get your business — and your business partnership — started off on the right foot.