Going into business with your family
According to the Harvard Business School, more than half of the businesses in the U.S. are family-owned and operated. Family ventures can be extremely rewarding but it is important to start out right. Here are some tips to help you along:
Put it in writing
Entering business with your family might be less formal than starting a typical company in some ways, but you are still entering into a business partnership, which means that everything must be in writing. Sam Prochazka, an entrepreneur who’s launched businesses with his identical twin, says, “Relying on handshake agreements, though tempting, leaves room for interpretation and disaster.” Legal documents allow you to set a down a number of rules to deal with future business decisions.
Get a formal structure
It is important for the family company to be a legal entity, by incorporating or forming a limited liability corporation, especially when multiple family members are part of the business. Formal structures protect individual assets from liability.
Keep business finances separate
Small business owners almost always invest their own money into their companies, making personal and business finances hard to separate. However, it’s important in family-owned businesses that the company has a separate bank account for accounting practices. Once you incorporate it becomes obligatory to maintain a line between personal and business accounts.
Maintain equality in employment
Your family might have started the company but you will need employees to help the business grow. Non-family members should never feel that family members are on the receiving end of special treatment. It’s essential to consider this in terms of hiring, salary and benefits, to ensure that everyone is being treated equally.