Spread the love

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.

  1. Make time to thor­ough­ly con­sid­er the pros and cons of going into busi­ness 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.

  1. Be proac­tive with busi­ness struc­tures

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:

  • Everyone’s ownership/stake in the busi­ness
  • A frame­work for every­one to fol­low which out­lines the para­me­ters of their rights/obligations
  • What busi­ness deci­sions must be unan­i­mous or made by the pri­ma­ry own­er
  • The required cap­i­tal and lia­bil­i­ty con­tri­bu­tions from all involved
  • What income is retained for work­ing cap­i­tal
  • Dis­pute res­o­lu­tion mech­a­nisms
  • Insur­ance arrange­ments and many, many more.

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.

  1. Seek ongo­ing sup­port from exter­nal advi­sors.

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.

Looking for further advice?

Con­tact Us