4 Major Things To Consider Before Going Into Business With Loved Ones

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office-romanceI have personally been approached to enter into business ventures with others on several occasions. A former boyfriend suggested that we start a business together in the entertainment industry offering services for music clearances and managing media content, and a dear girlfriend and former roommate and I decided to start a media business as well.

I had trepidation surrounding the decision to go into business with the ex-boyfriend, not because he was not talented, but because he was not reliable in our relationship. Yes, this man, in my opinion, is a genius. However, in our relationship, he never knew if he was coming or going, so I saw that as a sign that we would not be able to fully develop and nurture something together for the sake of business.

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My good girlfriend and I, on the other hand, took all necessary steps to form a company and actually made good strides until life hit. The recession, a divorce, child care and just tending to every day responsibilities kind of put our endeavors on the back burner.

Since then, I have gotten married and started my own legal practice. To date, my husband comes up with some really great ideas that I know we can breathe life into and make significant income from, but again, our focus is on other things.

So how should you determine if it’s the right time and right person to enter into a business venture?

Here are four issues to consider before making that commitment:

1)     Be Realistic.

Just because you love your potential business partner, does not mean you throw all business acumen out of the window. If that person is not reliable as a friend or relative, 9 times out of 10, they will not be reliable as a business partner. Trust your gut when entertaining proposals and solicitations for either monetary investments and/or physical or intangible assets. The last thing you want to do is lose money, time and a loved one due to a failed venture.

 

2)     Get Everything In Writing.

Yes, she is your mother, but business is business. I have found those who make a fuss about putting agreements in writing aren’t fully committed to a venture. You have to have difficult conversations about who will provide initial funding and/or sweat equity in building the business and also who owns what percentage. It’s best to have these discussions at the onset so you can determine if this is the best thing for you before investing too much time and energy.

 

3)     Be Professional.

There is some sort of ease about entering into a business venture with someone you know and love on a personal level; however, you must maintain a sense of professionalism when making business decisions. Maintain timely corporate minutes and records. Open a business account. Follow rules put in place in your Operating Agreement and/or Bylaws.

 

4)     Be Aware of Tax Benefits and/or Ramifications.

This is important when starting a business with a spouse. The IRS allows for certain business status elections, specifically allowing spousal businesses to elect to file as two separate sole proprietorships under a single business umbrella thereby making all issues surrounding income, gains, losses, deductions and credit separate for each spouse. Speak with an accountant prior to setting up an entity to ensure you are making the best fiscal decisions for your family.

 

Rashida Maples, Esq. is Founder and Managing Partner of J. Maples & Associates (www.jmaplesandassociates.com). She has practiced Entertainment, Real Estate and Small Business Law for 9 years, handling both transactional and litigation matters. Her clients include R&B Artists Bilal and Olivia, NFL Superstar Ray Lewis, Fashion Powerhouse Harlem’s Fashion Row and Hirschfeld Properties, LLC.

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