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Starting a business partnership with a friend

On Behalf of | May 22, 2024 | BUSINESS & COMMERCIAL LAW - Business & Commercial Law

You and your closest friend have often discussed the prospect of embarking on a business venture together. Now, both of you are prepared to make the dream a reality. You have decided to establish a partnership, with both parties intending to evenly share the tasks involved in managing the firm.

Prior to establishing a relationship with your closest friend, it is crucial to objectively assess any obstacles. Your partnership may be quite advantageous. The responsibility of making decisions is divided between the two of you and the profits are also shared equally. Nevertheless, certain drawbacks might put pressure on your friendship if you aren’t careful.

Drawbacks to forming a partnership with your friend

Here are a few potential challenges that might significantly strain your connection with your business partner and impact the company, as well as your friendship:

  • Refusing to establish a formal agreement. Allocate sufficient time to strategize on how to handle issues as they occur. 
  • Expecting the friendship to endure in the event of the partnership’s failure. Regardless of the strategy used, prioritizing business over friendship is essential. This could lead to conflicts between you and your partner, potentially ending your friendship.
  • Establishing a partnership due to financial constraints that prevent starting a sole proprietorship. If you lack the financial means to begin a business independently, you also lack the financial means to engage in a partnership.
  • The loss of autonomy may disrupt your partnership if you or your partner are unwilling to make the necessary concessions when problems arise.
  • Forgetting to prepare an exit strategy. It is critical to have a well-defined strategy that allows either party to withdraw from the partnership if necessary. This must be incorporated into your partnership agreement.

Establishing a partnership with your closest friend can be extremely beneficial, provided you are well prepared for any challenges that may arise. Before signing a partnership agreement, seek assistance to ensure that your partnership is on the right track.