friend wants to become business partners

[dan07]

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Hi i currently own and run a small painting company which i’m looking to expand. I dont have any employees just use subcontractors when needed. have a friend who is also a painter working for someone else who wants to join me in doing this and become business partners. I am currently structured as a company as a trustee for my own family trust. Any ideas on what the steps are in doing this? Im undecided if this is were and how i expand my business, ideally having him as my own employee would be what i would prefer but he wants to be part of the business. He is willing to bring a small amount of money and ideas into the business and pay any costs involved. I greatly appreciate anyones ideas or views on this matter.

[Divert To Mobile]

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Dan in my experience friendship and family partnerships have huge failure rates. Not the business – the friendships. Working with family and friends is a minefield, you absolutely need to get legal advice and make contracts to clearly define absolutely every detail as though it was a contract between two businesses. Otherwise I suggest don’t do it.

Steve

[MyGreatIdea]

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dan07, post: 125099 wrote:

…ideally having him as my own employee would be what i would prefer but he wants to be part of the business.

It’s your business and you would prefer that he was an employee. That’s what you need to communicate to him and quite honestly, what he wants is not relevant. If it means that you don’t get him to work for you, then so be it.

Family/friends and business rarely make a good combination.

Wendy

[kathiemt]

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Agreed with the others. It’s either upset him now and he can get over it, or have a bigger upset later on. I do know of some friends who work successfully together but then, I believe they develop the business together from the start and came with equal value to offer to the business.

If you decide to go ahead, strongly advise you get legal counsel over this.

[Past-Member]

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I agree with the others and if you value your friendship, don’t go into business with the friend.

You can easily explain that as the company is legally tied up with a trust it can’t be changed and your friend could be an employee and given management status. You need to make it clear that being part of the company is an option but would he be interested in the job/management (if that of course is something you would like also).

And if you decide otherwise, you must get it done by a legal specialist and it would cost money to dissolve your present arrangements, do associated tax returns and make a new company. Not a happy prospect either.

The fact that you are asking for input means to me that you really don’t want it either.

[Kennethti]

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Ditto with all of the above.

[AGMBris]

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Hi

Yep definitely be careful, having said that it can be done. You would need to know the absolute definitions of the business relationship V personal and be completely honest with each other about whether or not you can honestly have those “need to have” conversations.

Business is a blunt, aggressive, no grey communications sometimes and that does NOT go well for friendships. Maybe get a mediator but you need to know that you can definitely/honestly separate the 2 relationships. If there is any doubt, dont do it till you absolutely know.

From the accounting side of things, he needs to bring himself into the set up somehow which would probably mean him creating his own trust or becoming available for access of trading profits in some way. I assume you mean you trade in the Trust rather then in the company and that the company is simply the Trustee for the trust. Look it is too general to make assumptions and would definitely be worth you speaking to an accountant about how to introduce him to the financial organisation as well, perhaps at that time is the time for the hard discussion and laying down the rules for both of you.

I suspect your feeling of what you want re: him working for you has some merit though? Just a thought.

Good luck

[The Hobbit]

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Don’t do it.
Friends change once money is involved. Plus it’s hard to get out of such arrangements. Employ him or sub-contract him. Stay in control of your business.

[9069#deleted]

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Speaking from experience…I wouldn’t do it! I was supposed to go into partnership with a close friend that I’d known for about 4 years. About 2 days before we were due to sign everything, I discovered she didn’t have her share of the money & she wanted me to go into a shonky loan using MY house as security. She turned very nasty when I wouldn’t agree to this…& now I’m a sole trader! So beware! I think your gut instinct is telling you that anyway.

[tonyk]

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As others have already said on here, one of the most important things you need to do in this kind of situation is make sure that roles are clearly defined before you get into anything.

[MyGreatIdea]

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What a shame that dan07 hasn’t returned to the forum to read all the wonderful advice and support that members have given

Hope everything turns out well for you anyway.

Wendy

[tmerrill]

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I think going into business with a friend can work given the right friend. I would also agree with some of the above replies that you absolutely must get everything in writing. The few friends I have worked with have all been successful, but we had contracts that we signed before we started the business relationship.

As everyone has said, be careful! Good luck.

[MatthewKeath]

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Couple It, post: 125938 wrote:

What a shame that dan07 hasn’t returned to the forum to read all the wonderful advice and support that members have given

Hope everything turns out well for you anyway.

Wendy Happens a lot.

I would love an update to see what he decided to do.

[chixfashionz]

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dan07, post: 125099 wrote:

Hi i currently own and run a small painting company which i’m looking to expand. I dont have any employees just use subcontractors when needed. have a friend who is also a painter working for someone else who wants to join me in doing this and become business partners. I am currently structured as a company as a trustee for my own family trust. Any ideas on what the steps are in doing this? Im undecided if this is were and how i expand my business, ideally having him as my own employee would be what i would prefer but he wants to be part of the business. He is willing to bring a small amount of money and ideas into the business and pay any costs involved. I greatly appreciate anyones ideas or views on this matter.

What others have said is very true. It is best to avoid mixing business with family and friends. To make matters more complicated, you already have a corporate trustee tied to a family trust. I would be avoiding having your friend associated with either the company or the trust. There would need to be clearly defined rules as to what your ‘partner’ would bring to the equation.

Personally, I don’t like the sound of any of it. If you do decide to press on, be careful of the use of the trustee company and trust. You don’t want someone else having access to or control of these in the event the business goes pear-shaped. Maybe a partnership agreement could be drawn up? All I can say is, get good advice and a second opinion.

[Mrs Fox]

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I totally agree that personal relationship can complicate business partnership.
But business is all about risk. The question is will the risk outweigh the benefits of doing business with a friend. What is his net worth? Does he have an existing network of clients? Do you share similar business principles or short-term plan?

[Author]

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