10 Questions to Ask Before Family and Friends Become Business Partners
Bringing a family member or friend on board as a business partner may seem like a fine idea, but the relationship can prove tricky to navigate–or to end, if things don’t go well. “It’s easy to get into business, but it’s hard to get out,” says Wayne Rivers, president of the Family Business Institute, a consulting firm based in Raleigh, N.C
“You need to decide whether you want to offer your new partner an equity interest in the company, and if so, how much and how soon. Not only do you want to be sure a potential partner can add value to the business before sharing ownership, but you also should consider giving the person an interest in the business over a period of time, say five years, rather than all at once, says John Davis, faculty chair of the Families in Business Program at Harvard Business School. It can be easy to deal informally with family and friends, but you want to make the terms clear in a signed shareholder agreement.”