“But I’m just going into business with my friend.”
I talked to clients who feel no need to memorialize a business relationship with a friend or family member. They feel there’s no need because they trust each other. My response is that the reason they need an agreement isn’t about trust; it’s about the perception of the business arrangement.
If it’s a one-time joint venture or an extended business arrangement, friends and family members should write an agreement that dictates the parameters of the business. Who will contribute money, and how much will they contribute? Who will handle certain duties in the company? How long will the venture last? And most important, how will people get paid.
It’s usually money that unravels a ‘friendly’ business arrangement. People misremember prior conversations about how the money would come out of the business deal. Maybe one person put in less money but worked more in the company and expected an equal split. Or maybe one person thought payments were quarterly instead of yearly.
All these issues become moot if there is a written comprehensive agreement. The agreement should cover the key points of each person’s responsibility, how the money is handled, and the company’s objectives. If the agreement accomplishes this, then most, if not all, significant issues are handled. There are fewer disputes and relationships remain intact.
A quick call with me and I can explain what needs to be done to protect everyone involved in the business.