ask karleen - should you have Contracts with friends or family?
I am launching a business with my friend, and I wanted to know if I should have a contract, especially since we have been friends for so long and she is like family.
Thanks, Naline S.
First, it is terrific to have a partner with whom you can launch a business. Entrepreneurship can be lonely and having someone to do it with it can take the load off. However, it is still a business, and you must treat it that way, even with friends or family. So yes, you should have a contract.
Having a contract is essential because expectations and responsibilities are clear. If you start a business with a friend, the likelihood is that they probably are expecting a 50/50 split. Wouldn't you if you created a company with a friend? But what if you use your home for storage or do deliveries while your friend only takes orders? You may incur more expenses, costs, or time. You would want to be appropriately compensated for that.
With a contract? You can highlight critical milestones you will both reach to earn the 50/50 split or whatever split you decide. For example, you may suggest that to have a 50/50 financial split; each person may have to dedicate a certain amount of hours per week or key responsibilities each person must complete daily. I guarantee that once you spell out these things, your partner will either agree or augment the contract because they may realize they can't do it or do not have the same commitment.
Now think of the opposite. What if you do not have a contract and something happens to your partner? Who gets their side of the business, their relative, another friend, or a spouse? A contract defines the "what-ifs," too. So, whether it is a relative, friend, boyfriend, or mythical creature, have a contract!
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