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Starting a business can be exciting, and what better way to do it than sharing that experience with a friend. Before you start putting together contracts, a business plan and investment proposals, here are some things to know before starting a business with a friend.
Everyone has their own personality quirks, and as a friend these quirks might not bother you. If you plan to go into business with your friend, consider if these things will become a major issue.
Quirks to watch out for include:
Tardiness: Is your friend often late to meet when you have plans? Has your friend ever mentioned arriving late to work? Tardiness could affect you negatively when meeting with clients or investors.
Procrastination: Letting things go till the last minute could be a major issue. You want someone who gets things done quickly and without deadlines.
Passiveness: Nothing is worse than running a business with a partner that waits to be told what to do. This can be tolerated at times from an employee, but not someone who is helping steer the ship.
Whether You and Your Friend Can Resolve Differences in a Healthy Way
As with any close relationship, there are bound to be conflicts. Most likely, both you and your friend will be passionate about being successful, and you won't always see eye-to-eye when it comes to how you will reach that goal. Since that conflict is inevitable, will you and your friend be able to resolve conflict in a healthy way?
It might seem premature to create and sign legal documents needed for a business that hasn't really begun. However, it's one of the first things you should do when starting a business.
There are three things that these legal documents should cover:
• Control of the company: These include a voting agreement, a vesting schedule for equity, and a right of first refusal.
• Ownership of intellectual property: This will ensure that all intellectual property brought to the table is owned legally by the partners.
• Protection of business idea: Before you start telling the world about your great business idea, be sure that it's protected through NDAs and that you only discuss the idea with those who need to know.
In addition to legal documents, you should secure business insurance, which protects your company's assets.
Business partnerships are a lot like marriages. They take a lot of work and they shouldn't be gone into lightly.