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March 26, 2014

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If I know my relative very well, then partnership with them is not a problem I think. But before you decide, you need to research thoroughly.

I hate to be so negative but I am an accountant/tax preparer and I would have to say that 99% of partnership businesses fail. Usually because one partner puts in more time into the business than the other/others and feels that their efforts are unequal to the other. If you are still considering the partnership, I would strongly suggest a partnership agreement be drawn up in the beginning with specifics on each partner's duties, roles, and expectations so that each partner is clear on their participation. I can only think of one successful client that is a long time family partnership business with 3 brothers. Quality work but they fight/bicker all the time.

I think much of it would depend on which friend/family member was interested in the partnership. There are a few that I think I could work well with, but many others that it would be a recipe for disaster due to the emotional reasons that the reader quoted from Entrepreneur.
But even if it were one that would theoretically work, I think Laura is spot on that you still need a formal partnership agreement to lay out the ground rules and clear expectations. CYA for everyone.

I worked at a family run business for five years while at school and had brothers who went into a business together that lasted seven.

The family run business was a restaurant. The Dad cooked and ran the kitchen, that was his domain. The Mom ran front of house and did the majority of accouting. It worked for them when they had a small shop. Conflicts arose when they expanded to a larger place and pulled their kids into the business (including my friend who recruited me and a few others). Other than my friend to varying degrees the owners kids caused chaos by doing things like: shorting (or just theiving from) the register, helped themselves to property from the restaurant, often taking other people's orders to ensure their tables got served first, etc. just to name some of the issues. Those of us not of the blood typically got the short end of the stick. One time their daughter, her husband, and her brother (all worked there) went out of state for a one week vacation, leaving us seriously short handed but workable for a week or so. They were having so much fun they stayed for five weeks. Despite a lot of lip service, no consequences except a lot of shouting. Their attitude, "What are they going to do, fire us? Fat chance, we're family."

In a different vein my brothers went into business together. One wanted to be in charge and make a lot of the business decisions, but didn't want to do any of the dirty work or be held accountable. So for example he'd hire some guy without checking his background, and when the guy turned out to be a dud, he'd expect the other brother to do the firing. Or he'd say he was the primary for doing job estimates, but then not show up for the appointments and the other brother would be scrambling to cover. Again, lots of yelling, but no real consequenses (other than to the business). It only lasted as long as it did because they were family.

So the point to all this:

Understand immediate family typically trumps friends or pals who may work there, no matter what people promise or say, often to the business' detriment.

Some family members expect to be treated special, even when they don't do anything special or flat out suck. You can usually see them because they are the ones shouting the loudest about all the good things they do, particularly if the business is stuggling.

Even if you set ground rules, if someone flaunts them, what are you really going to do? What options do you really, honestly, have and actually will exercise? You may want to consider that up front because promises are cheap.

Try to determine what you are good at, and be willing to be focused on results and not egos. Much of that is hard to do with family, because often it's about nothing but ego's and who hurt who and who puts in more, etc., though it can be done.

I will say, in both cases, neither the restaurant or my brother's business were in the red at the end. They were both making enough money for folks to live on, though nobody would be getting rich from either. So even if it's a headache emotionally you may not suffer financially, so it can be worth a try as long as you go in eyes open.

If I were to have ever started a business I would never have family members as partners. I would always want employees that I could hire, and fire if necessary. There needs to be someone at the top that has the power to do whatever is necessary for the health of the business without any regard for the personal problems of any other person associated with the endeavour.

I also don't think it's a good idea because it could likely result in a lot of rancor, bitterness, and arguments and have a very negative effect upon a family's harmony.

Quick add on, by eyes open in my previous comment I should say you understand that you may end up carrying the lion's share of work through all the drama to keep the business successful and you have to determine what your end game is, either in time, effort, or financially.

My dad and uncle have operated a successful business for 35+ years. They wouldn't call it a "family business", because no other family members work with them (they keep it very insular from their wives and kids). I think they're very happy with it. My dad has mentioned before that he likes having peace of mind that he has a partner that he trusts without qualification. I think with the right partner (like a sibling with good character and shared values), it can be great.

After 2 years of planning I joined my father in law in business in 2010. He had an existing practice I bought into last year & we also acquired another busines under a separate entity in 2011. We are now split 50/50 across the board. Both of us handle our own duties/clients & are very open any time we have a quesiton on anything. We both respect each other very much & aren't afraid to compromise even though we have strong personalities. We've been decently successful because we both work hard in the business, but at the end of the day, I think respecting each other goes a LONG way!

In the beginning, we also agreed to not bring any grievances home with us to discuss with our wives to avoid potential family conflict. The big "D" question is asked to me a lot & what would happen if that happends. My simple answer is that it won't. Not an option for me. I'm one heck of a catch & think the same of my wife :)

C

While a "Business Plan" is always required, a "Going-Out-Of-Business Plan" is often ignored or shrugged off as "negative thinking." But any business, especially one starting in 2014, has got to be prepared for this eventuality.

People who want to "partner" are approaching you, because you have something they want (capital? skillset? geographically convenient? time? network?). They are approaching you, not the other way around. It is business, and business is to make money. If you see this as a "gift" or a "favor" to the family who needs you to invest that "something they want", then don't do it. It is much harder to get out of business and partnership than into one. And once you do get out, you are still family and all that implies. Think about a Thanksgiving meal 5 years from now. You have your answer.

Jeez, what a mess. I don't know if I'd start a business with a relative. Maybe my brothers or parents, but probably not with my cousins. I worked with my brothers and parents before so I know what it's like and I trust them to not screw me over.

I'd pass.

Chances you can get a good healthy functional working business relationship between 4 relatives doesn't seem very high to me.
Depends on the relatives of course. But honestly I can't pick 4 relatives of mine that I'd want to be in a partnership with. Too much drama.

My uncle and I bought a bar/restaurant together. Ran it for 5 years. It caused a bit of issues, but we are still close today.

Family is first, business second.

In every partnership there needs to be a written partnership agreement. That is for starters.

Going into business with family can work but I do believe that it is more difficult than if it is "just business partners".

There is no question that with family comes drama. And with Drama comes irrational, unprofessional thinking, conduct and stress.

Someone above said family first. I agree. And as usual--- I think Old Limey was right on point.

So I would avoid additional family stress and keep business and personal separate.

But that is just me.

My mom and my aunt had a small business before, it was a small food business. When you decide to do a partnership with a family member you need to have a solid agreement.

DON't do it!!! I had several businesses and a brother as partner. We made good money. We hired a business coach who asked a lot of questions and eventually said it's never good for family to be in business together. I told him, "not my family. We always support each other and my brother would never turn on me. after 25 good years, he continuously overspent his good income and wound up in deep debt. His only solution, in his mind, was to steal from the business. It was a mess. The company folded and hurt feelings still exist even after 8 years. My coach warned me. I'm warning you. I now am a financial adviser and business consultant. I can help family businesses write a solid agreement with easy exit plans that my attorney did not do for me. So far all the family businesses have more headaches then non family businesses and FAR less profitable. If you want pain and misery, go for it. You've been warned.

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