Should you partner in business with family or friends?

Published date: November 2016
Author: Judy Wilkins

You realisethe benefits of joining forces with like-minded individuals who could bring new skills, talents, perspective and value to your business. It is only natural to consider family or friends you have known and trusted for most of your life.The question is: is it wise to go into business with family or friends?

It is not so much about going into business with family or friends but rather about how you get into business together. In an ideal world, a hand-shake would be enough for you and family members or friends to go into business together. However that's difficult to do these days, especially when family members and friends also have to care for their children, spouses and estates as well, therefore increasing the chances of the business falling apart should there bemisunderstandings and disagreements.

Often a lay person going into business will consider that having a written partnership agreement is sufficient. However it is not and especially with family. Why you say ? When you enter into a partnership with someone, you and your partners personal assets are at risk. Therefore, if the business fails you can lose your house and furniture. You can imagine how few friendships or family relationships can survive that

It is far better to form a company . You can do it yourself quite easily by looking at CIPC online. You then enter into a Shareholders agreement which specifies who does what , who contributes what and happens if one of you dies or wants to sell and if the company fails only the companies assets are at risk not your own

An agreement is a must have, especially with close friends or family members.

It is vitally important for business partners, irrespective of the nature of their relationshipbefore entering into a business, to have a shareholders agreement in place, in order to give the business a life line when these relationships simply can't.