A sibling, best friend, long-term spouse, or even a parent might be among the first people you consider for a business partner. The idea for your company may have even come from a chat with one of these loved ones. While starting a business with those close to you can seem great, blending professional and personal relationships shouldn’t be taken lightly.
Without careful planning, bonds can be strained and feelings can be hurt amid the challenges of running a business. Let’s explore the pros and cons of this type of business venture so you can make an informed decision.
Advantages of Starting a Business with a Loved One
A business venture with someone you care about can offer a unique experience with unmatched trust and understanding. Oftentimes, the bonds you already share can help to strengthen your passion for the business, leading to a more efficient and dynamic work environment. Let’s explore some of the main advantages to working with someone close to you.
Natural Efficiency
A long-term relationship means a natural shorthand has probably already developed. You understand each other’s communication styles, strengths, and weaknesses, which can lead to greater efficiency as a business. This familiarity can streamline decision-making and improve collaboration.
Shared Vision
Especially in in a partnership between spouses, there’s usually a shared vision that aligns with the business’s goals and values. This mutual understanding can prevent disagreements on the company’s direction and help maintain a unified front, which is crucial for long-term success.
Consider, for example, establishing a non-profit animal shelter that’s spurred on by your’s and your partner’s shared love of cats. Having the mutual goal of leaving no kitten behind means you can do a whole lot of good for the world without the fear of unaligned ambitions.
Trust and Emotional Support
Having someone you trust intimately as a partner can be invaluable during the emotionally trying stages of business ownership. When times get tough, having a loved one by your side can provide the emotional support needed to overcome challenges and remain motivated.
Disadvantages of Doing Business with a Loved One
While there are countless benefits to working with someone as familiar as a friend or parent, there are potential hazards that should be considered before diving in headfirst. Make yourself familiar with some of the possibilities below to understand the opposite side of the familial business coin.
Personal Conflicts
Personal issues are more likely to bleed into your professional environment when you work with family and friends. Business stresses can affect your personal relationship, making it difficult to separate business issues from private ones. This overlap can lead to tension, and could strain both your professional and your personal life.
Complicated Breakups
A breakup with a loved one can have exhausting consequences for the business. Dividing assets after a falling out or a divorce can be complicated and emotionally taxing. Removing members from an LLC can also be time consuming and inconvenient. Additionally, finding the money to buy out a partner who decides to leave can pose significant financial and logistical challenges.
Lack of Objectivity
When you’re emotionally invested in someone, it can be harder to provide honest feedback. This lack of objectivity can make it difficult to address concerns about performance, quality of work, or other critical issues, potentially allowing problems to fester and grow.
Telling a sibling or parent that their attendance is problematic or that their recent performance has been subpar can be incredibly uncomfortable, even more so than addressing the same issues with someone you have a purely professional relationship with.
How an LLC or Corporation Can Help Avoid Issues
Considering the pros and cons above, a certain level of apprehension is understandable here. Fortunately, formalizing your partnership by creating a registered business entity can help mitigate or avoid many issues that might arise from a hybrid relationship. By using the established processes below, you and your loved one can navigate the ups and downs of business ownership together, just as many others have done before you.
Internal Governing Documents
An operating agreement is an impartial document that lays down the law of the business. Having this serve as a list of unbreakable principles can help prevent disagreements by setting ground rules in advance. It can define each partner’s responsibilities, initial capital or asset contributions, and mechanisms for resolving disputes. In the case of a corporation, corporate bylaws function in much the same way by objectively mapping out the guidelines and protocols your company will adhere to.
Legal Business Structure
Having an LLC or a Corporation provides a legal framework that can help clarify roles, responsibilities, and ownership stakes. This formal structure can reduce the likelihood of personal conflicts impacting the business by establishing a purely professional environment to operate in. Think of this like the ‘no cell phones at the table’ rule, it functions in a similar way to keep the purpose of an interaction consistent.
Consider a Subsidiary Structure
Having a single LLC or corporation isn’t your only option. By utilizing a series LLC structure, or by forming a corporation with one or more subsidiary companies, you’re able to form a distinction between roles, ownership, and responsibility in a more formal way.
If you’re more familiar with the marketing aspect of the landscaping business you share with your father, who acts as the boots on the ground delivering services, consider using one of these structures to separate your roles legally while still enjoying the experience of a joint business.
Throughout everything, maintain a clear distinction between personal and professional affairs. Avoid letting disagreements on business matters spill over into personal interactions. Don’t let disputes over a vendor relationship ruin Thanksgiving dinner.
All in the Family
Starting a business with a loved one can be incredibly rewarding, offering the potential for deepened trust, shared vision, and mutual support. By understanding the potential pros and cons, drafting a robust operating agreement or corporate bylaws, and maintaining a professional focus, you can navigate the challenges and enjoy the benefits of building a business with someone you care about.
When you’re ready to take your business ideas to the next level, and form a power duo with someone you love, Northwest Registered Agent can help you start your business, build your website, and support you throughout your business journey.