Basic thoughts on starting a business: Over the years, I’ve watched many people start businesses, either on their own or with a business partner, friend or family member. While some of the businesses thrived and went on for years with no major issues, others didn’t have the same luck. But is it luck? A large percentage of headaches, discontent, anger, lawsuits, failed friendships, and rifts between family members could have easily been avoided by early proactive planning.
Mainly, the business owners are simply too focused on getting the business off the ground and making money. Without money the business can’t survive, right? But without the proper underlying foundation, the business will begin to rot from the inside. Even in good times, this rot can bring a business to a halt.
So, what is this rot and what can be done to prevent it? The foundation must be laid at the earliest of the planning stages even while the idea for the business is still being hashed out. I’m taking about getting your paperwork in order: operating agreements, shareholder agreements, employee agreements, non-competition contracts, etc. All that fun stuff that the business owner often wants to ignore. “I’m working with my cousin and we are very close. Why do I need an operating agreement for my LLC?” “My friend and I don’t want to be bothered with a shareholder agreement for our corporation. We work well together and will be able to resolve any issues between us. We don’t feel the need to spend the money on an attorney right now.” “I’ve been the only owner for a while, but I am bringing in a partner to help me grow. I just have the time to get to it.”
Yep, those lines of reasoning sure do sound good for the start-up business owners. Everything is peachy keen, that is until times get tough or one party has an idea to take the business in one direction while the other party has other ideas. A document put in place at the very start of the business relationship that clearly delineates the authority of each party, the expectations the parties have of themselves and each other, and the means and methods to address differences in thought can save thousands of dollars down the road in legal fees, save the heartache and headache of arguing with friends and family, and provide for an avenue to keep the business going even if the parties go their separate ways.
Before you deal with that first customer, ensure that you have everything in place to properly run your business and avoid the trouble that has cursed so many others.