It’s not personal, it’s business
It’s not a bad idea, but you also don’t want to go into business with friends without doing your own research. If you are going to do it, take the same steps as if you were starting a business with anyone else. Look into each potential business partner’s work, credit, business and personal history. You may want to look at credit reports or run a background check to make sure they are being honest with you about their finances and background. If you are satisfied with what you find, start putting together a Business Plan and register a corporation or LLC to protect yourself.
When registering your business, making an LLC Operating Agreement can help organize everyone. From how decisions are made and conflicts resolved to how profits and losses split, an Operating Agreement can be the instruction manual for how you and your friends will run the business. It may also explain what may trigger the end of the business and how to split the assets if the business closes.
The right structure makes the difference
Registering a separate legal entity for your business, usually an LLC or corporation, is a good idea when you start a business with friends. If you do not register as one or the other, or take other steps to protect yourself, your business may be operating as a general partnership. In a general partnership, each partner can be personally responsible for the actions of each other partner.
By registering and running your company as a corporation or LLC, you are insulating your personal assets from the liabilities that the business may incur. This means the business, and not you personally, is held accountable for the actions of its employees and other owners. It also makes it easier to share bookkeeping and recordkeeping responsibilities. Holding regular meetings also helps with keeping up with how the business is doing, which can prevent a lot of problems down the road.
Ways Rocket Lawyer can get you started:
Register your business.
Whether you’re a co-founder, silent partner, or any type of co-owner, when you register your business, you’re not just telling the world that your business is responsible, you’re also protecting your personal assets as the owner. With a Rocket Legal+ membership, your first business registration filing is FREE (excluding state fees). And when you need a Registered Agent, we've got you covered there too. A Rocket Lawyer Registered Agent is HALF OFF with a Rocket Legal+ membership.
Talk to a Legal Pro.
For new businesses, startup founders, or when cash flow may not be optimal, access to a Legal Pro, especially to answer your questions as they come up, can help with decision-making. The right advice at the early stages is critical to long term success. When you have legal or tax questions, reaching out to a Rocket Legal Pro™ is an easy and reliable way to get affordable legal advice.
Everything Legal all in one place.
The right support network and structure is critical when mixing friends and business. From partnership documents to human resources, help with a new name and logo, and even Pro Services for registering your LLC, and filing your taxes, Rocket Lawyer has everything legal all in one place.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
