Starting a new business with a good friend can be very exciting, and carry many benefits. However, such a venture can also have challenges. How well-suited a business venture undertaken by friends is for meeting such challenges can in part depend on what is done as the business is being set up.
So, there are many things it can be important for a person to give proper attention to when starting a company with a close friend. Among these are legal matters.
One such matter is what business entity to pick for their startup. A person might be tempted to think that all that really matters is that they will be partnered with their friend, and that what entity they choose really won’t matter that much. However, business entity choice is a very impactful decision.
The different types of business entities vary in their rules, advantages and drawbacks. If a pair of friends that starts a new business together picks a business entity with characteristics not well-aligned with their goals, it could make achieving these goals all the more difficult. Business lawyers can provide entrepreneurs looking to start a new company with guidance on which entity choice would likely be best suited for their goals.
Another legal matter that can be very impactful when friends start a business is what agreements they form. A person may be tempted to think that putting the details of a business relationship down in writing isn’t as important when forming a startup with a friend as it is with other business partnerships. However, a well-drafted business operating agreement could prove very helpful for a business venture started by friends.
For one, such an agreement can set clear expectations regarding the roles, responsibilities and duties each friend will have in the business. This could help with preventing tensions from arising during the course of running the company.
Also, in the event that tensions and problems do come up between friends who are in a business venture together, having a well-constructed business operating agreement could help set a road map for how the problems are to be handled. This could make navigating the matter easier on all the parties involved.
Individuals planning to start a business with a friend can take questions they have regarding what sorts of agreements they might want to have in connection to the business to a business attorney.