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Entering into business with a friend

entering into business with a friend

Some of the greatest businesses start with a group of mates or friends bouncing ideas around with each other over a few drinks or around a barbeque. Apple is perhaps the most pertinent one in the world at the moment. Steve Jobs and Steve Wozniak started as college mates with a common interest in technology and computers, For anyone who knows the story, the relationship between the two went a little stale towards the end and Steve Wozniak opted to get out of Apple as Steve Jobs took the company in a direction that was too far removed from Wozniak’s original ideas. Yet they remained friends and Wozniak was able to leave with no disputes over his role or financial situation. So for those of you looking to start a small business in Sydney or Melbourne with friends or especially family, here are a few key tips and traps to be wary of: -

  • Never create a discretionary trust with a non-related person, such trusts are only for a family group. Unit trusts or companies should be used in such situations.
  • Always have a signed partnership agreement where a partnership is created to establish guidelines in the event of a dispute between partners.
  • Always outline and document the roles of each partner or director at the beginning and also decide on how each partner or director will be remunerated.
  • Where possible remember business is business and friends are friends. If you can’t have a spirited debate about your business, and then share a drink with your friend at the days end, then you’ve let the two interfere with each other. A recipe for disaster.
  • Every business partner or director must be kept abreast of the business financials, electing to bury your head in the sand is not an option, nor is it a valid defence in court cases and the other partners should not let this happen. 

There is no reason why a business created with friends or other investors can’t be a great success. Just be sure to clearly define everyone’s role sand responsibilities when it comes to both running the business, and handling the finances. By having documented agreements in place future disputes can be kept to a minimum and friends can remain friends, even if the business ceases at any point in the future.

 
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