Starting a new business venture with family or friends is an extremely exciting time and having people in your business that you know, and trust can be reassuring. However, when it comes to thinking about the appropriate business structure agreement to put in place, we urge you to err more towards compliance than complacency to ensure your relationships stay intact.
Here are some of the main considerations to think about prior to entering into a business agreement with your family or friends.
The excitement of starting a new business can sometimes mask the need to take some time to seriously consider what you’re potentially about to invest your time, money and energy into and more importantly, with who. Going into business with family and friends can be a very positive experience, however, it can also present a lot of challenges and differences of opinions when tough decisions need to be made.
Choosing a logo or drafting your 12 months revenue forecasts may seem far more enjoyable tasks to complete than deciding the legal and tax structures of your business. However, we believe these structures are vital to the future success of your business.
When these structures are in place, it creates much more certainty for everyone involved in the business and can save you a lot of time and money down the track if any disputes arise. Put simply, a legal framework will define in legally enforceable terms:
No matter how close or long your relationship is with your friends/family, having both legal and tax advice on the structure of the business and ensuring you have a written agreement signed by all parties concerned will save plenty of potential future headaches.
It is extremely valuable for a business to receive external advice from experienced professionals, especially to help navigate tough decisions. Disputes between friends/family about business can be particularly difficult and unpleasant and emotions can stand in the way of rational decision making. Getting an outside balanced perspective is mutually beneficially for all.
To avoid arguments over differing opinions about the operations of a business, having a properly prepared agreement in place or an external advisor will save you time, money and a lot of emotional stress.
At Donovan Oates Hannaford, it is important to us that our clients receive the best and most accurate information for their individual circumstances which is clearly understood. Therefore, if you’d like any further information on setting up your business, please contact Donovan Oates Hannaford on 02 6583 0400 or info@dohlaw.com.au.
