- Things to Know when starting a business with friends
- Pros and Cons
- Should you do it?
- How to do it?
- Do’s and Dont’s
A business partnership is usually formed when a business is in short of financial or personal and/or other resources. When looking for a business partner, the first choice is usually a close friend or relative who has been in the same business/industry as yours and could complete the void in your business perfectly. The major reason for choosing a friend as a business partner is the trust factor. You know them, trust them and believe their skills.
But is it actually wise to get into business with your friend? What if it ends up destroying your friendship with them? What is the business fails and you start blaming each other? These and many other questions must be answered first before you plan to start a business partnership together.
Things to Know when starting a business with friends
Legalization of the partnership
A legal business partnership gives you the facility to easily start your partnership business and take the help of the law, if and when needed.
The partnership agreement will consist of the details of the individual roles, responsibilities, share, the percentage of profits & losses, etc. so that your friends know what they are supposed to do in the business, and you do not have to continuously remind them of that.
Important Things to be Discussed in Advance
These will include the usually tough conversations like who will be the owner, the CEO, the head of product, and other things like salary, job title and descriptions, and so on. It is better if the roles and titles are assigned according to the eligibility of the individual partners.
Remember that you do not owe your friends any favours, at least not within the business, and you are not supposed to make compromises when it comes to their roles and responsibilities in the business. Each partner of the business should be treated equally. If you can do that, they only get into partnership with your friend.
New, Fresh Perspectives
A new partner in the business should be able to bring fresh ideas and perspectives. It’s a good thing if you and your friend have a lot in common and think alike, but you should also be able to present different perspectives on certain conditions. Otherwise, it might cause shortness of new, different ideas.
Personal and Professional Lives
When you include a close friend into your business, you give them access to your professional life and things that only your office staff or management know. These things are likely to get out when you socialize with the same person with whom you do business.
Pros and Cons
There are both advantages and disadvantages of doing business in partnership with a friend. It depends on which ones matter the most to you.
Pros of Starting a business with a friend
- You get a partner that you actually know and even trust.
- They are likely to share your beliefs, thoughts, and decisions.
- There’s already a good communication standard between you two.
- You better understand each other’s strengths and weaknesses and can assign roles accordingly.
Cons of Forming a business partnership with a friend
- A friend as a partner may not receive the same level of respect from you as an unfamiliar partner will. It is more casual and less formal kind of relationship.
- It is usually difficult for people to confront a friend the same way they will do any other partner or employee. Such confrontations may often lead to breaks in friendships.
- It may become a matter of pride and respect between friends as to who is the boss in the mutual company.
- The chances of your professional life overlapping with your personal (social) life are very high.
Should you do it?
Starting a business with your friend has a nice ring to it. It can become a good thing or a bad thing depending on how you take and treat it. It would be an amazing thing to build a business having your friend beside you, helping you in every step. It won’t be an easy thing and you may often face challenges when you’ll have to choose between your friend and the business, but you can deal with that in an intelligent manner.
Overall, you can certainly form a business partnership with a friend if you think it is worth it.
How to do it?
Wondering how to start a business with a friend? Well, it’s not difficult at all. You just need to register a partnership firm under your names, and then you can start right away. Make sure to consult with a good lawyer and draw a substantial partnership agreement to keep your personal (social) and professional lives separate.
Do’s and Dont’s
- A business partner must be someone who pushes you, challenges you, and who has the skills and intelligence that complement your own skills. If you have such a friend, you should get into partnership with them. But do not make your friend a partner in business just because he’s your friend, however, doesn’t have any other special skill.
- Define the roles of each partner clearly, and focus on your own work rather than continuously interfering in someone else’s job.
- Make sure to legally register the partnership business entity.
- Choose a CEO who actually deserves the title.
- Do not make special favours for your partner friend.
- Do not partner with a friend who thinks exactly like you and has a similar personality and even skills.
- Do not exclude or ignore other team members and/or partners when discussing ideas with your friends outside the office (on a social gathering).
- Do not let friendship overcome the professionalism.
- Do maintain appropriate bookkeeping and file regular tax returns.
- Communicate often and in a friendly yet professional way.
Recommended Reading: How to Build a Good Partnership without Ruining the Relationship
Overall, a business partnership with a friend is not a bad deal, to begin with. However, the success of such partnerships depends largely on how well you can keep your personal and professional lives from interfering with each other. The same things, more or less, are applicable to a business partnership with a spouse.