moral decisions when friends are business partners

[234 AM]

Try to keep this as short as possible. - i started a business with a friend over a year ago. small ceiling texture company. We have been fairly slow with occasional big jobs that pay nice but overall things are pretty tight. When we first started the company it was pretty much mine and i brought him aboard. My tools my experience (10 years) his around 2 years experience, and also my vehicle that we do the work with. so i have always been the one who does the harder work and he basically has been doing the job of a helper (though he does work hard). Now he cant save his money so I have payed for the material for every single job even though i get my money back in the next couple days i have never had any financial support from him. the most it has been is a little over $700. Now it is obvious that I am putting much more into this company then him, and I do make it known. and now i think it is fair that i should make a slightly higher profit then him and he does not like that idea. he says he will start bringing money to the table but that is a story i have heard before. He also says he will start doing the more difficult work and i know that the quality of our work will suffer slighty as a result.

So my question for all of you is: Should I insist on a higher % of the profit until he has payed me off for half the tools and starts buying 50% of the material for all jobs.

Or do I make the tuff and slightly harsh decision to go out on my own. Pay him off for the 10% of the tools he owns and hire a helper for a fraction of the profit that he was earning from the company.(he was making 50%). And I would almost surely lose him as a friend as a result of this. but i can almost rataionalize the loss of his friendship to insure the companies success.

I am honestly stumped and feel every day as though I am being takin for a fool funding this company well this guy makes a fortune off me.

Thanks for any feed back on this subject. also is there any thing else I am not considering here?

[vangogh]

This is a tough question and I think the solution is going to have more to do with your relationship with your friend than anything else. Ideally you would have set up a partnership in the beginning specifying everything in writing about who's responsible for what and the % of the profit each partner gets, etc.

One other thing is your situation is exactly why many people suggest not to go into business with friends. It's possible that the only solution for you is going to put a strain on the friendship, which may or may not be able to heal. You may have to weigh which is more important to you, the business or the friendship. Not the most pleasant of thoughts, but I want you to be prepared for what may happen.

From your description it sounds like you're partners in name only. Has anything official been done to declare you both as partners? Who's name is the company in? Yours? Both? How do you file taxes?

Your answers to the above would be more about the legal stuff in case your discussions about reworking things doesn't go so well.

There are two issues here. One is how the money gets divided and two is how the work (both the construction and running the business) is divided. Right now it sounds like you feel as though you do most of the work and yet half to split profits equally. Beyond that it's only you that invests money back into the business. It's only fair if you do more for the business that you deserve more of the profits.

The way you might want to approach this is to get together with your partner and do the things you really should have done at the start. Define who's responsible for what and look at who owns the assets of the business.

The actual construction work is only one aspect of the business. There's also the marketing, the accounting, the customer relations, etc. If your partner wants an equal share in the profits it only makes sense he take on equal responsibility. If you're doing more of the construction work he should take on more of the marketing say. The reason for getting together and defining who;s responsible for what will give you something to look back at.

Say your partner agrees he'll be responsible for the accounting and 3 months from now it's clear he isn't keeping up with it. It becomes much more obvious to both of you that he's not pulling his weight and it backs you when talking about who deserves what % of the profit.

Similarly if you start looking at who owns the assets the business uses and who's contributing financially it's clearly going to show you own most of the businesses assets. Again it's another point in your favor when determining who gets what % of the profits.

After you've looked at all these things together it should be easier to have the conversation about profits since you'll have a lot of proof that you're putting a lot more into the business than he is and deserve to get more back out of it.

You may have to be prepared to let him know that since you're doing more of the work and you've been the one contributing financially that he either excepts your terms about dividing the profit or you're taking your assets and experience with you and starting over on your own. My guess is he needs you and isn't going to want you to leave.

I think ultimately you're going to have to put your foot down and be prepared for the fact that the friendship could be irreparably harmed in doing so. That's why I suggest all the talking through responsibilities and writing down who's been contributing what financially. It should become more obvious to your partner that he's not pulling his weight and it should be easier for you to demand he either does more or takes less of the profit. And if he doesn't you may want to ask what kind of friend he really is.

Hopefully something in there helps. I know this isn't an easy situation. Try your best to make it clear you're doing more for the business and so either he needs to match what you're putting in or accept less of the profits. Failing that you do need to be prepared to go it alone at the risk of the friendship.

[234 AM]

Thank you for the quick and helpful response.

First. nothing has officially been done to declare us both as partners. We didnt put anything on paper and we did not discuss any specific responsibilities either of us had.
We started with separate business numbers and names and planned on one day incorperating if it seemed wise. but legally we are not binded. we file taxes seperately as sole proprieters. lol this may sound illegal? his dad is an accountant and insures us its fine.

Thanks for your opinion and i will keep you informed of what happens. any more advice or questions are welcome.

[vangogh]

Given the situation it's probably best you didn't put anything on paper. That'll make it easier to separate if it comes to that. Am I right in thinking you'd rather work this out than go your separate ways?

If so do try sitting down with your partner and talking to him about everything. Sometimes the hardest thing is getting the discussion going, but once you get it going you can find a way to work things out where you're both happy. On your side I think pointing out how you've been contributing more to the business, especially if you do this point by point, will hopefully make your partner realize he needs to do more or accept less back from the business. And if he can see you're willing to walk then he'll more likely to want to make it work.

[Steve B]

Honestly, I think the decision on what to do is painfully easy. It's the execution of the decision that stinks. It's clear you have to dump him as a business partner. Well, actually, you really just have to communicate to him that he never became a business partner and that he can go out on his own after you pay him for his portion of the tools, or you will pay him for his portion of the tools and he can continue to work for you for $10 per hour (or whatever he's worth as a helper).

You have a 99% chance of losing him as a friend. But, just like he was really never a business partner, perhaps he was really never a friend if he's able to take advantage of this situation without guilt, shame, remorse, etc.

[rebelnetworks]

Yes the hardest part of a business owner is working with friends and family and then the tough decision - in a nut shelll - "it sucks" - but Steve is right - the decision is easy - its the execution that is hard!

[Business Attorney]

First. nothing has officially been done to declare us both as partners. We didnt put anything on paper and we did not discuss any specific responsibilities either of us had.

Just a cautionary note: There is a good chance that whether or not you "put anything on paper" or did anything "officially" to create a partnership, you HAVE created a partnership for legal purposes and you each have fiduciary duties to each other. Just from what you have described here, it sounds like a partnership to me.

I would suggest that you speak with a business attorney before doing anything else. If you have a partnership under the laws of your state, certain things that you may want to do to prepare for dissolving the partnership (such as discussing the new business with a key customer or vendor) may violate fiduciary duties you owe to your partner.

[Spider]

I agree that talking this over with your friend is the first step. However, I do not support the approaches suggested. First, you have not indicated where you live so any legal suggestions must be subject to that. David's advice to consult a business attorney in your jurisdiction is sound.

I believe any discussion along the lines of who is doing most of the work and who owns what tools will be contentious and that will impede progress in your conversation.

In this situation, it is possible to place the business on a sound footing AND maintain your friendship. There is no reason in my mind why doing business with friends or family members should be any more difficult than doing business with strangers. In fact, the reverse should be the case from the mere fact that strangers are an unknown entity.

You say, "When we first started the company" but also say, "We didnt put anything on paper" - so I take that to mean you didn't start A COMPANY, which requires putting something on paper.

You also said, "We started with separate business numbers and names" and "we file taxes seperately as sole proprieters." Subject to David's cautionary note, I think you are two independent contractors working together project-to-project. As is typical in the construction industry, the relationship ends with the end of every project and starts over with every new project.


This is how I would approach my friend:

-- "George (assumed name), we've done a few projects together and we've been fairly successful, but I think it's time for us to formalize the business. We probably aren't getting the work we should because we are just two guys who aren't really a proper company. We could approach clients better if we incorporated.

" We need $20,000 to form a company, get set up properly, print letterheads, business cards, etc. pay an accountant to set up our books, and so on, and open a bank account to purchase materials. If we are going to maintain our 50/50 relationship, you need to come up with $10,000 to make this happen. Do you have $10,000?" --

Notice that nothing has been said about the amount of work each of us has done in the past, so we avoid that argument.

From what has been stated, George probably doesn't have $10,000. If not, ask him how much he can put in? If he says, "Nothing," then tell him, "Well, if you don't put anything in, George, you won't be part of the company. How can we get over this hurdle?" -- and let George suggest a way that he can become part of the company, when it is formed.

I have avoided the argument about relative proportions and share of profit and turned it into a mathematical equation. If George can only contribute $1,000 to start up funds, and I can only put in $5,000, we start with $6,000. George and I will be the only shareholders and the share of profit is therby set at 1/6 for George and 5/6 for me.

You leave George fully in control of his own destiny, and it works out with total fairness. And when it comes to wages, you can pay both of you the same, because when you keep your pay as low as possible, the profit increases and you get the lion's share of that, to compensate you for the extra work and responsibilities you accept. (There are tax implications of this, so make sure you get an accountant's input.)

George is left feeling fully in control of his own situation, retaining his willingness and loyalty, and his friendship. You get to control the company formally and get paid a share of the profits all in mathematical accordance with your financial contribution.

If this is put to George in a frank and friendly manner, you can set the path of your business for bigger and better things. You also get to control it, and you can even cement your friendship by demonstrating to George how fair you are being with him.

I hope this helps.

[vangogh]

I believe any discussion along the lines of who is doing most of the work and who owns what tools will be contentious and that will impede progress in your conversation.

I completely agree. It might not have come across in my post above (my bad for replying so late at night). All my suggestions were meant to discuss where things are going from here on out, not so much meant to be focused on the past and who's done what so far.

The idea of discussing who will be responsible for different aspects of the business as a way to open the discussion is with the idea that it's being done to grow the business. Same thing for an accounting of the current business assets. The idea is to talk about what will be needed to grow the business.

In doing both though what's gone on in the past should become evident. It's a way to make your partner see that without actually having to say "I'm doing all this, while you're barely doing that."

Definitely approach the conversation with the idea that it's meant to improve and grow the business and not as a way to rehash what's gone on in the past.

[huggytree]

seems like 99% of partnerships die...im strongly against partnerships overall.i think people do it out of fear...they want to share the risk and it makes them feel better to have a partner.

one person works harder than the other and feels he deserves more than 50% of the profit....if you asked your partner id bet he'd say he works harder than you!

kill the partnership...i dont understand why you did it in the first place..i wouldnt hire a friend or relative and im always cautious when i work for one.

hire a lawyer and have him write it all up....now you'll be battling over the customers...he will be your enemy very shortly.

[234 AM]

Thank you thank you. amazing responses. giving me lots to think about here.

First to the commentors saying to go my own way even though the friendship is over after:
We came close to going our seperate ways earlier on when he decided to go and get a job because he could not save enough from our company to pay his bills. I told him I thought it wise for me to pay him off for the tools and go on my own and he threatened, and I quote:"I dont see our friendship lasting long if you do". So after a lengthy discussion I agreed to stick it out but made it known that he had better start bringing some money and hard work to the table. So I guess that shows what the friendship outside of this business means to him?

For what Spider said: "I think you are two independent contractors working together project-to-project". Yes that is very accurate.
I like your idea of demanding $ to set up a more legitimate and profitable business, BUT the thing is that I already invested. bought all the tools, a van, business cards, etc.. and when I bring it up he states that he has no money now but will buy the next thing we need, though he never has. NOW can I figure out my worth in this company which must be 60-75% and demand he pay off an equal percentage, with out coming off as an asshole?

I think the main reason I feel the way I do is because I put ten years of my life into builiding skills and money for this company and to see my business partner basically getting a free ride and 50% of the companies profits, simply because he is a friend, ways heavily on my mind.

[KristineS]

I think you might need to look at this a different way. I'm not sure this guy is a friend. Maybe he calls himself a friend, but someone who truly was a friend would be carrying his share of the weight and wouldn't be content to sit back and let you shoulder the financial burdens and the burdens of running the business. Even, or especially, if he's short on cash, you'd think he would be trying to make up the shortfall in other ways, if he was truly concerned about preserving the partnership and being friends.

Look at it this way, if you guys had met the day you started the business and things have proceeded as they have so far, would you hesitate for a second going out on your own?

[Spider]

...I like your idea of demanding $ to set up a more legitimate and profitable business...That is not my idea, at all, and I'm sorry if I led you to believe I was suggesting demanding anything. If you take that attitude you will kill your business relationship and your friendship.



...BUT the thing is that I already invested. bought all the tools, a van, business cards, etc.. and when I bring it up he states that he has no money now but will buy the next thing we need, though he never has. NOW can I figure out my worth in this company which must be 60-75% and demand he pay off an equal percentage, with out coming off as an asshole? ...Wow! It is becoming increasingly clear that you are not interested in maintaining the friendship or the partnership, after all.



...I think the main reason I feel the way I do is because I put ten years of my life into builiding skills and money for this company and to see my business partner basically getting a free ride and 50% of the companies profits, simply because he is a friend, ways heavily on my mind.Clearly, you do not understand partnership, nor do you appear to have any willingness to be a partner to your friend. I sincerely believe you need to work on your own attitude before you even attempt to work on your friend's. I think you have made it pretty clear what this friendship means to you.

[234 AM]

I spoke to him about me making 55% and him 45% profit simply because I pay for all the material prior to a job. He was not happy with that and wanted to postpone jobs until he can come up with his 50% for materials but... maybe I can throw some numbers at you all and see what you think my profit % should be compared to his.:

I own 80% of the tools. I own the work vehicle, pay the insurance and maintenance plus company decals and so on, he pitches on gas but only pays after we have just finished a job, never before. 90% of the jobs outcome/quality of work depends on me well he basically runs around grabbing tools for me and setting up and cleaning up. which is basically what a helper would do. Now he can do what I do but he is not as good as me and i end up having to watch his every move and usually have to fix his work after. so I end up just doing it. As for advertising and promo, it is pretty much all on my shoulders.

What would a fair % for my profit be? Or do I really need to bite the bullet and end this partnership (and most likely friendship)?

[234 AM]

ok spider: " I sincerely believe you need to work on your own attitude before you even attempt to work on your friend's."

Well said. I indeed do not know if I am just being greedy and selfish and maybe arrogant?

maybe i do not understand partnership.. more than just dividing responsibilities?

As for the friendship.. I put much more value on the company. I am not willing to let this company fail to save one friendship.

[vangogh]

It sounds like you really do know what you want to do here. I think it's clear to you that the business is more important to you than the friendship and from your description it's not sounding like your partner is the greatest friend in the world Granted we don't know his side of the story, but he's not here.

You probably do want to consult with an attorney just in case. I get the feeling it won't end up being necessary, but that's only my feeling and you do want to be prepared. After that you need to talk to your partner. Only you can decide how to approach that talk. Do you think the partnership can work with a few changes? Are you willing to compromise some on what you want to find out?

Based on everything you've said it sounds like the business is really you alone and not the two of you and setting the terms or walking away might be the best option. I'm not saying things can't work out, but it sounds like your partner will continue to say anything to keep the status quo without actually changing unless forced to.

[Business Attorney]

Based on everything you've said it sounds like the business is really you alone and not the two of you ...

Without talking to your partner, we can't really make a fair evaluation of the respective contributions to the business. From your own comments, however, it does sound to me that this is not a partnership you should be in.

Your approach, which I wouldn't necessarily call "greedy and selfish," is to weigh every contribution you make, versus your partner's contributions. I don't think many partnerships can survive that type of microscopic scrutiny. If it's not "one for all, all for one" then at least there needs to be some general sense of balancing. I may be reading more into your comments than justified, but it seems to me that you need to be in control.

My two cents worth is to end it now while there is relatively little of economic substance to argue about, because it is tough to see your business arrangement surviving over the long term. In all likelihood, if the business prospers there will be even more resentment on your part than there is while the business is struggling.

[Spider]

I am always intrigued by the opinions held regarding partnerships. Almost all of the major corporations are still, or started out as, partnerships.

1. Wal-Mart Stores - Sam Walton purchased his first 5-and-10 store with money from his father, and his first few stores were run by managers who were limited partners.
2. Exxon Mobil - formerly Esso, formerly part of Standard Oil. Standard Oil began as an Ohio partnership formed by the well-known industrialist John D. Rockefeller, his brother William Rockefeller, Henry Flagler, chemist Samuel Andrews, silent partner Stephen V. Harkness, and Oliver Burr Jennings
3. Chevron - founded in 1879 as the Pacific Coast Oil Co. The company evolved into the Standard Oil Co. After the break up, SoCal became Chevron.
4. General Electric - Partnership between Thomas Edison's Edison General Electric and Charles A. Coffin's Thomson-Houston Company. (Both plants remain in operation under the GE banner to this day.) Edison formed the Edison Electric Light Company in New York City with several financiers, including J. P. Morgan and the members of the Vanderbilt family.
5. Bank of America - Amadeo Giannini founded the Bank of Italy in San Francisco, for the purpose of catering to immigrants other banks would not serve. Later renamed to Bank of America. (Does not appear to have been a partnership)
6. ConocoPhillips - Marland Oil Company was an American oil company founded by oil exploration pioneer E. W. Marland when he assembled his various holdings into one unit, and later changed its name to Continental Oil Company - CONOCO. By 1920 it is estimated that Marland and his partners controlled 10% of the worlds oil production
7. AT&T - The formation of the Bell Telephone Company superseded an agreement between Alexander Graham Bell and his financiers, principal among them Gardiner Greene Hubbard and Thomas Sanders. Name later changed to American Telephone and Telegraph Company - AT&T.
8. Ford Motor - The Ford Motor Company was launched in a converted factory in 1903 with $28,000 in cash from twelve investors.
9. J.P. Morgan Chase - JPM partnered with the Drexels of Philadelphia to form the New York firm of Drexel, Morgan & Company. After the death of Anthony Drexel, the firm was rechristened "J. P. Morgan & Company."
10. Hewlett-Packard - Bill Hewlett and Dave Packard graduated in electrical engineering and formed a company which originated in a garage in Palo Alto during a fellowship they had with a past professor, Frederick Terman at Stanford. Terman was considered a mentor to them in forming Hewlett-Packard.
*2010 Fortune 500

Nine of the Top Ten Fortune companies are or began as partnerships. Consider also that Microsoft, Apple, Cisco, IBM, Oracle, Yahoo and Google all also began as partnerships.

It's a very good thing for America that 98% of partnerships do not fail but are the most innovative and enduring business entities around.

[Business Attorney]

I am always intrigued by the opinions held regarding partnerships. Almost all of the major corporations are still, or started out as, partnerships.

Not to mention a few upstarts like Apple, Microsoft and Google.

Any one person has his or her limitations. Some people have ideas, some have cash; some are strong in marketing, others in finance or operations. It does not surprise me that most major corporations were not born of the efforts of a single individual.

Still, partnerships are fragile things. Particularly in a small business, my experience is that many partnerships fail. Often it is due to poor initial planning. If 234 AM had laid the ground rules up front - it's my truck, my tools, my experience and I think a 70/30 split is fair - then perhaps he would have a workable partnership. On the other hand, his current partner may have rejected the proposal and there would have been no partnership in the first place.

[huggytree]

you may think you contribute more than your partner, but i guarantee he thinks he does equal or more than you...ask him?

one person always does more than the other..thats why they fail...greed and envy

id dump him tomorrow and move on

if what you say is true he's holding you back from success.

who gets the leads you or him? who brings in the business?

[Business Attorney]

Speaking of partnerships, here is the story of Ron Wayne, one of the founders of Apple Computers (http://www.chicagotribune.com/business/feed/ct-biz-0607-wayne--20100607,0,2525878.story), who sold his 10% interest in the company back to Jobs and Wozniak for $800.

[vangogh]

Ron who? Oh I guess that's the point :)

@Frederick - I think the issue isn't so much partnerships in general, but going into a partnership with a friend or relative. It becomes hard to separate the relationship from the business, which I think makes it hard, though not impossible, for the business to become successful.

You listed 10 succes stories and there are certainly more than 10 successes that started as a partnership. What you don't list is the many more than failed.

[Spider]

...You listed 10 succes stories and there are certainly more than 10 successes that started as a partnership. What you don't list is the many more than failed.Where can I find such a list? Not in Fortune magazine, that's for sure!

But the point is, VG - this isn't just any list of 10 successful companies, it is a list of the 10 largest, most successful companies in the world. (According the Fortune.)

If one of them had started as a partnershiup, you could say - "Look! See? It is possible for a partnership to succeed." But 9 out of the 10? That shows that partnerships have beaten all other forms of business start up, hands down! It is overwhelming evidence that the most successful method of starting a business is by being in partnership with at least one other person.

[Steve B]

I stand by my first post. Get out ... get out now ... he was never your friend anyway. Of course, this is assuming you're giving us even a roughly accurate picture of the situation.

I just got out of a similar situation with a new company I started. I was doing 90% of the work and getting 75% of the customers and and we were supposed to split the profits. In our case, we each chipped in the same amount of money. It was far better to get out early while there really wasn't much to divy up. He and I seem to be friends again, but it would have been O.K. with me if we weren't. In this case, we weren't friends very long before the business.

[vangogh]

Frederick I was kind of teasing with my last post. Naturally there wouldn't be any way to find that other list. I don't think anyone publishes failure magazine.

I understand those companies are very successful and started as partnerships. I don't have anything against partnerships in general. The problem I see with them is most people who become partners really shouldn't be. The ideal partnership is one where the partners skills complement each other instead of duplicating each other. I think most small business partnerships are a couple of friends or relatives who's skills are the same. Both want to do the same work and assume the other one will take care of what they don't want to do.

Plus when there's an outside relationship involved it gets mixed in with the business and usually not in a good way.

[Spider]

Frederick I was kind of teasing with my last post. Naturally there wouldn't be any way to find that other list. I don't think anyone publishes failure magazine.
..I understand those companies are very successful and started as partnerships. I don't have anything against partnerships in general. The problem I see with them is most people who become partners really shouldn't be. The ideal partnership is one where the partners skills complement each other instead of duplicating each other. I think most small business partnerships are a couple of friends or relatives who's skills are the same. Both want to do the same work and assume the other one will take care of what they don't want to do.
.. Plus when there's an outside relationship involved it gets mixed in with the business and usually not in a good way.Yes. I got the tease.

People who shouldn't be in a partnership? That's like saying there are people who shouldn't be in business for themselves. One can learn about business, one can learn about partnerships. I think the trouble is people start businesses without a clue about business and wonder why they fail. You fall off a bicycle until you learn how to ride it.

I think people start businesses thinking there's nothing to learn, that it comes naturally. And they start a partnership without understanding what a partnership is. The outside relationship is one example. If you know what a partnership is and how it works, an outside relationship can help rather than hinder.

I started my business as a working partnership (ie. not a formal partnership as such but a formal corporation with a balance of shareholding between three people.) I was business friend with one and courting the other. Worked beautifully, because we each understood what it meant to work together.

[vangogh]

Again I don't have anything against partnerships in general. The issue comes down to the relationship outside the business. It may not be easy to make the business decisions you have to make if you have to choose between that decision and your friend's feelings. I've seen more than one friendship and family relationship end forever over business.

All I'm saying is if you decide to form a partnership you should think about who you choose as a partner before getting in too deep.

Yes people can learn to be better business partners with anyone. People can also learn how to be brain surgeons and astrophysicists. In theory at least. In reality if you mix business with personal relationships there's much more potential for something to go wrong. It doesn't necessarily have to go wrong. It could very well work out great. You have to be aware though, that it's likely the personal relationship that's going to be the dominant relationship when for the business it should be the business relationship that dominates.

For most people it's hard to separate the two and for most people it's hard not to let the personal relationship be the one that dominates.

[Spider]

Yes, I pretty much agree with that, VG. I think you have demonstrated a major problem that arises, not only with friend/business and family/business partners, but with any business relationship - the notion that associates are separate part-persons.

By that I mean, thinking that being a friend is separate from being a business associate; being a family member is separate from being a business associate. That is a fallacy and the fallacy is the cause of problems rather than the fact of the relationship. As long as you try to deal with a person in part and not as a whole person - only as a business associate and ignore all other aspects of the person - you will have problems. The days of such segmented lives are long past - thank goodness.

[vangogh]

That's exactly it. And on the flip side I've seen friends and family members become partners and work well together. It comes down to the personalities of the people and their relationship. It can definitely work. I think more people though go into the partnership as friends without the understanding that their business relationship has to be a different dynamic.

[KristineS]

I think another thing that needs to be addressed is the fact that this partnership was formed without anyone setting down any expectations of how things should go. The ideal way to form a partnership is to set down in writing who will do what and how profits will eb divided and expenses will be met. Make sure everyone understands their responsibilities and duties. That way you won't end up with a situation like the OP is facing or, if you do, you'll have something to back up your concerns.

[vangogh]

Yep. That's why I said what I did at the start. Since none of that was set up in the beginning I thought it could be an easy conversation to bring up with the idea that it was being done for the business. In dividing up responsibilities and accounting for the company assets it seems like it would be clear who's been contributing more to the business, which would make that conversation a little easier to approach.

[234 AM]

to answer huggytree's questions: I built a website and promoted it which brings us 90% or our business. He brings in occasional jobs from friends and family but so do I.

Him an I are in the middle of a big 2 day job now. We will make some nice money and again 50/50 profits for us both. We found out about the job on friday night on the way to a poker game/party at a friends house. I guesstimated the cost of material need for the job, which we would start on tuesday, at around $600. He agreed and I told him things would be tight and I could use a contribution to which he replied: "no problem, I should be able to pitch some money then" so on to the the party we went. 3 or 4 games of poker later he has lost every one, probly down $50 he is hammered and so am I. then he sends some girls to the store with his money for more beer... pizza smokes.... anyways. tuesday rolls around and he tells me he spent the last of his money on groceries. So I get a little bitter and spout off at the mouth pretty much every thing I have told you all in my posts and I say I think I should be earning 60% profit.. he says "well fine. lets bump the job a few days then I can borrow money from my girl friend and pitch on the job and then i can get my 50%" So I told him "its not just about the money, I can easily cover the cost, its the fact that you have never contributed financially..." Its a long quiet ride to the job. Tomorow we will be paid and it will be 50/50. At work he works hard, he means well and he has a problem saving his money. Not the poor guys fault but... I DONT NEED HIM! I could replace him in a second with a $25 an hour employee and almost double my income.

So maybe thats what it boils down to? not the fact that he does not contribute enough rather the fact that I do not need him. ?
So now what do I do

[Steve B]

The answer seems to be clear in your own mind (and it was clear in mine from your first post). I understand why it would be hard to do, but it sounds like you already have decided WHAT to do.

I think you made a big mistake telling him you want 60%. What if he would have agreed! That's not what you want, and it's not what is fair given your description of the situation.

Also, around here, someone with his skills is worth about $10 to $14 per hour.

[Patrysha]

Also, around here, someone with his skills is worth about $10 to $14 per hour.

He's in Alberta though - that range is what is paid to dishwashers, prep cook, fast food and convenience store clerks...he'd be really hard pressed to find a motivated worker who can think for him (or herself) for less than $20.

[Harold Mansfield]

I'll just be quick and blunt. Your "partner" is obviously taking advantage of you. Why do you cover more of the expenses, yet take an even split?

There may be one way out and save both the friendship and the partnership.
It seems to me that you don't take expense out first before you pay each other.

you need to figure out ALL of the expenses that you have to run this business. Insurance, Truck maintenance, Gas, and so forth and that money needs to come off of the top before anyone gets paid. You should also set aside a certain amount to finance the next job..or at least start to build a kitty that is constant, to finance upcoming work.

It shouldn't be that he pays you for things after he gets paid...he should never have that portion of the money in his hand in the first place.

Expenses come first. All of the expenses. This is how business is done, if he doesn't get that, then he needs to be relieved as partner.
Right now, he is just an employee taking half of the money.

It's obvious that he has no idea what it takes to run a business, so you need to give him an education real quick.

If he is resistant, or gives you a hard time about it...you have to dump him. You won't be the one ending the partnership or the friendship, his irresponsibility would be the culprit.

It sucks. Doing business with friends sucks..somehow you always get screwed or paid less.

But IMO, you can't grow or survive with this guy attached to your ankle slowing you down and costing you money.
You are absolutely correct that you can hire a guy to do what he does, without the headache and the cost...and will probably be a better worker.

You guys didn't go into business together, YOU went into business and he exploited your friendship to tag along for half of the profits.

[DeniseTaylor]

Yours is exactly why working with friends is not an ideal situation, because it adds factors that complicate things and those things aren't necessarily business-related.

What I mean is that you have to now factor in how far you're willing to go in terms of maintaining the friendship, in case it goes that far. If the friend situation wasn't there, I'd say, put your foot down and stick to your guns. But it may be better to just go off on your own. Either way, there could still be remnants of disagreement left behind no matter what you do.

I would encourage lots and lots of communication - open, free-flowing communication so both sides can have their view. If both are allowed to communicate, then you stand a chance of coming to a mutually beneficial agreement, whatever that would be.

So as complex as this answer is, that's my advice: communicate, then decide where you'll jump off - then use that measure, if need be.

[vangogh]

because it adds factors that complicate things and those things aren't necessarily business-related.

That's exactly it. And it's not to say people with personal relationships can never be business partners. There are plenty of success stories out there. The issue is it complicates things because it brings the personal relationship into the business relationship and unfortunately business decisions are then often made based on the personal relationship.

Communication is definitely important. Best to have done it from the start, though starting today will be better than starting tomorrow.

[Spider]

I'm still hearing a consensus that personal relationships (friendship and family) are anathema to a business relationship. Yet the list I recently posted of the 10 largest companies, 9 being or having started as partnerships, I wonder how many of those 9 partnerships involved friends or family?

From what I can eaily ascertain:-
1. Wal-Mart Stores - Initially family partnership, subsequently business only.
2. Exxon Mobil - formerly Esso, formerly part of Standard Oil. Standard Oil - partnership partly family, at least, and the rest, if not wholy then partially friends.
3. Chevron - founded in 1879 as the Pacific Coast Oil Co. The company evolved into the Standard Oil Co. As above.
4. General Electric - Partnership probably business, depending on how friendly Thomas Edison and Charles Coffin were.
6. ConocoPhillips - no indication whether this partnership was friends/family or strictly business.
7. AT&T - no indication of the partners being related or friends.
8. Ford Motor - The Ford Motor Company - partnership almost certainly of friends and family.
9. J.P. Morgan Chase - original name suggests family partnership of the Drexels and friendship between JP Morgan and Anthony Drexel.
10. Hewlett-Packard - partnership of school friends and tutor.

Of the 9 businesses that are or started as partnerships, only 3 are probably business only partnerships, and the other 6 are, to a greater or lesser degree, partnerships of friends and family.

Add to that, Microsoft, Apple, Yahoo and Google are , or were, all friends in partnership.

So I cannot join this general objection to having friends and family as business partners. The facts, limited though they may be, do not support the argument.

[vangogh]

No one is saying it can't be done. We're just saying that if you go into business with someone you have a personal relationship with outside of the business, be prepared for that relationship to become part of the business, when it really shouldn't be. Some people can easily separate friendship and business. I even mentioned how I think my brother and I could go into business together. I think our relationships is strong enough and our skills complement each other. Most people don't seem to be able to separate the business and the friendship.

I know you're showing 9 very successful companies and they may very well have started out as partnerships between friends or relatives. What you're not showing are the many, many, many businesses that started out the same way and failed miserably.

By the way of the 9 companies you listed I can only find information to show that 2 of them were started by people who knew each other before starting the company. Exxon Mobile (from the Exxon side as the original Standard Oil) and Hewlett Packard. The other 9 don't appear to have been started as partnerships between friends or relatives, though I may not have searched enough.

They may have become partnerships with friends and family later, but we're talking about business in the beginning. Once there is already money flowing in and a business structure in place the personal relationship thing doesn't dominate as much.

[Steve B]

Finding 9 successful partnerships doesn't seem pertinent to this discussion without some reference to the ratio of successes to failures. I'm guessing (purely a guess) that parterships involving friends and family fail and end in misery more often than other type of start up. There might be tens or even hundreds of thousands of failures for each of the 9 successes. It's a number that would be impossible to measure since most of them fail so early. I personally started three partnerships with friends and none of them worked.

[Spider]

Finding 9 successful partnerships doesn't seem pertinent to this discussion ....I didn't just pick 9 businesses that suited my argument, Steve. I looked at the 10 most successful companies in the world, according to Fortune magazine 2010.

Sure, there are plenty of business only and personal-relationship partnerships that have failed, but when 9 of the most successful companies in the world are, or started as, partnerships, that says something, I think. And when 6 of those 9 are, to a greater or lesser degree, partnerships of friends and family, that also says something.

If only one had made it to the Top 10 list, it could be argued, "well, yes, it's possible." But when a vast majority of the top list are or were partnerships, and two-thirds of those involve friends and/or family, I don't think the argument of "most fail," is supported. It's possible that most fail, but the result shown suggest otherwise, and until someone comes up with some logical or statistical argument that lends credence to the failure argument, I don't see it.

[Spider]

Although, I must add this, from a business coaching angle --

If you believe that a business partnership with a friend or a family member will fail, then (should you start one) it most certainly will fail. What we think about, we bring about.

If, on the other hand, you believe that a partnership with a friend or a family member will succeed, then it most likely will succeed. Any failure, in this case, will not be as a result of the personal nature of the venture.

I put it to you further, that any business failure - no matter what the relationship between the parties - will be for business reasons, not personal reasons.

[vangogh]

when 9 of the most successful companies in the world are, or started as, partnerships, that says something

First the issue has never been about partnerships in general. In this thread it's always been specific to starting up a business with either friends or family as partners.

Also did you see my last post. I only found information on 2 of the 9 companies you listed to indicate they started as partnerships with friends or family. The others may have eventually added partners that were friend or family, but in the beginning it doesn't appear this was the case. At least from what I could find in my admittedly limited research. If you have better research, please share.

[Spider]

First the issue has never been about partnerships in general. In this thread it's always been specific to starting up a business with either friends or family as partners...And that is what I addressed in the very paragraph from which you quoted me.



..Also did you see my last post. I only found information on 2 of the 9 companies you listed to indicate they started as partnerships with friends or family. The others may have eventually added partners that were friend or family, but in the beginning it doesn't appear this was the case. At least from what I could find in my admittedly limited research. If you have better research, please share.

1. Wal-Mart Stores - Sam Walton purchased his first 5-and-10 store with money from his father, and his first few stores were run by managers who were limited partners. I said, "Initially family partnership, subsequently business only."

2. Exxon Mobil - formerly Esso, formerly part of Standard Oil. Standard Oil began as an Ohio partnership formed by the well-known industrialist John D. Rockefeller, his brother William Rockefeller, Henry Flagler, chemist Samuel Andrews, silent partner Stephen V. Harkness, and Oliver Burr Jennings. I said, "partnership partly family, at least, and the rest, if not wholy then partially friends."

3. Chevron - founded in 1879 as the Pacific Coast Oil Co. The company evolved into the Standard Oil Co. After the break up, SoCal became Chevron. Similar rationale to Exxon.

4. General Electric - Partnership between Thomas Edison's Edison General Electric and Charles A. Coffin's Thomson-Houston Company. (Both plants remain in operation under the GE banner to this day.) Edison formed the Edison Electric Light Company in New York City with several financiers, including J. P. Morgan and the members of the Vanderbilt family. I said, "Partnership probably business, depending on how friendly Thomas Edison and Charles Coffin were.

5. Bank of America - Amadeo Giannini founded the Bank of Italy in San Francisco, for the purpose of catering to immigrants other banks would not serve. Later renamed to Bank of America. (Does not appear to have been a partnership)

6. ConocoPhillips - Marland Oil Company was an American oil company founded by oil exploration pioneer E. W. Marland when he assembled his various holdings into one unit, and later changed its name to Continental Oil Company - CONOCO. By 1920 it is estimated that Marland and his partners controlled 10% of the worlds oil production

7. AT&T - The formation of the Bell Telephone Company superseded an agreement between Alexander Graham Bell and his financiers, principal among them Gardiner Greene Hubbard and Thomas Sanders. Name later changed to American Telephone and Telegraph Company - AT&T.

8. Ford Motor - The Ford Motor Company was launched in a converted factory in 1903 with $28,000 in cash from twelve investors. I said, "partnership almost certainly of friends and family."

9. J.P. Morgan Chase - JPM partnered with the Drexels of Philadelphia to form the New York firm of Drexel, Morgan & Company. After the death of Anthony Drexel, the firm was rechristened "J. P. Morgan & Company." I said, "original name suggests family partnership of the Drexels and friendship between JP Morgan and Anthony Drexel."

10. Hewlett-Packard - Bill Hewlett and Dave Packard graduated in electrical engineering and formed a company which originated in a garage in Palo Alto during a fellowship they had with a past professor, Frederick Terman at Stanford. Terman was considered a mentor to them in forming Hewlett-Packard. I said, "partnership of school friends and tutor."
*2010 Fortune 500
( http://www.small-business-forum.net/managing-your-business/3048-moral-decisions-when-friends-business-partners-2.html#post32498 )

Thus, there are indications in my first listing that companies 1, 2, 3, 8, 9, and 10 (6 in total) had one or more friends and/or one or more family members in the respective partnerships. This is not to say that Companies 4, 5, 6, and 7 were not started as partnerships or partnerships with friends and family - only that I found no reference to them being so.

And we mustn't foget our favorite four - Microsoft, Apple, Yahoo and Google are , or were, all friends in partnership.

[Business Attorney]

I'd just like to point out that the points being made by Frederick and Vangogh are not mutually exclusive. It could very well be true that partnerships fail at a higher rate than sole proprietorships AND that those partnerships that do succeed are more likely to grow faster and bigger than a sole proprietorship.

It's pretty common that risk and reward go hand-in-hand.

At some point, it becomes impossible for a business to grow beyond a certain size without relying internally on people beyond a single owner. Those "partners" may be partners in the true legal sense (i.e., co-owners) or they may be key employees, equity investors, or lenders to the business. Whether the business owner is relying on the others for contributions of skills and knowledge, physical labor or financial support, he needs more than just himself to succeed beyond a point.

But just because his business might be poised to grow bigger, faster by taking on a partner doesn't mean that 234 AM should take on a partner. Whether it is his current partner (who seems to be a bad match at this time) or another partner, if his needs can be filled by an hourly employee, having a partner seems to offer little reward to offset the attendant risks.

[vangogh]

Once again David makes some very valid points. I'm suggesting there's more risk in going into business with family and friends and Frederick is pointing out that at the other end of that risk is huge reward.

I think you have to decide what your goals are. If you want to be a big international company then maybe it's worth the risk. If not then maybe the risk outweighs the reward.

Frederick in 3 of the companies (Walmart, General Electric, Ford) the family/friend connection is one of investors. While that technically could be a partnership depending on how the business was set up, I think it's very different than what we're talking about here. Investors aren't necessarily involved in the day to day decisions of the business. Naturally that depends on the investors and why they invested. But take the case of Sam Walton. I'm speculating, but I would guess his his father wasn't involved in the business other than giving or lending the money to buy that first store. I think that's a very different scenario than 234 AM and his friend working together daily on the same jobs.

I don't see evidence one way or the other about Chevron, though I'll grant you JP Morgan. That leaves 3 of 10 (I thought we only had 9?) companies where we're talking about a friend or family partnership where all were involved in actually running the business from startup.

And again I'm not nor have I ever suggested that the idea can't work. Even if we're talking 3 of 10, that's still some great reward. But remember we're a small business forum. Most people here are not looking to become mega corporations. Some might, but I'm guessing most here are looking to have a business that they enjoy and that can support them and their families with modest comfort. In my own experience and observations going into business with friends and families creates additional problems to the ones you're going to face anyway starting a new business. It's something that needs to be considered and for most people it's probably not the best idea.

[Steve B]

Pointing out what you already posted about your examples being in the top ten of the most successful businesses didn't address my point. My point is the ratio of successes to failures. Because of the extra emotion involved etc. my suspicion is that the ratio is inordinately high.

I think it's a terrible idea for the average person who wants to run a small business to enter into it with a partner - especially if the partner is a friend or family member.

BTW - if any business I ever started turned into a Wal-Mart I would consider it an incredible failure. I measure a "successful" business far differently than most however.

[Harold Mansfield]

Business partners and friends are 2 different things and IMO should be kept separate. Not saying that you don't eventually become friends with a business partner..especially if all goes well.

I'd sooner go into business with an acquaintance who has the needed skills and dedication, than with someone that I regularly crack beers with.

In my experience, any business idea that any of my friends have had, is usually based on things that I already know how to do without them without any added expertise or substantial financial investment on their behalf.

That's not a partnership, that's "Let's use your expertise to make us some money".

[Spider]

Actually, it wasn't my intent to talk in favor of partnerships becoming huge businesses, especially. I wasn't trying to argue that partnerships were more likely to become huge and successful. I was only using the predominance of partnerships in the list of the most successful companies as an indication that partnerships were not more risky than sole proprietorships. Maybe I didn't succeed in doing that.

However, I still have heard nothing in this thread from anyone that can show that partnerships with friends and/or family members are more likely to fail that other partnerships. All I have heard is anecdotes and supposition based on one or two bad experiences.

I just wanted to balance the generally negative opinions of everyone else that would serve to discourage a prospective small business owner from entering into such an arrangement. I believe the general opinion to be wrong.

I believe that, in terms of small business success, logic favors the friend and/or family member partnership over business relationship only partnerships, and partnerships in general over sole proprietorships.

In a nutshell -

1. Partnerships over sole proprietorships : Two heads are better than one, and three is better than two.

2. Friend and/or family member partnerships over business only partnerships : More thorough knowledge of partner(s), their skills, their attitudes, and their ability under pressure. Greater likelihood of working for a common cause.


Added: Perhaps I should also add that I have, throughout, been contemplating partnerships in substance rather than form. Partnership agreements may be more varied, and thus more open for contentious legal interpretation, than straightforward incorporation, and that might open up a can of confusion. I would recommend incorporation where the "partners" own shares in a fashion that no one partner could have veto power over the other(s). This is easily done with financial contribution in the purchase of initial shares.

[Harold Mansfield]

However, I still have heard nothing in this thread from anyone that can show that partnerships with friends and/or family members are more likely to fail that other partnerships. All I have heard is anecdotes and supposition based on one or two bad experiences.


I don't think you will. Each situation is different. For every failed instance I can name a successful family business, or business friendship/partnership.

I think if you are going into business with a close friend, you know up front all of the potential for drama, so most times there aren't any surprises.

That old saying that we have all uttered at least once or twice (sometimes a week) "I knew I shouldn't have..." applies. Most times if there is at least one level headed realistic person in the group, you know when something is a bad idea. Sometimes we still go forward on a hope that your fears won't come true or that some kind of metamorphosis will take place.

If I picked 5 of my closest friends and charted a hypothetical for going into business with each separately . I could probably tell you exactly how each one of them would end up or dissolve.

My personal preference is not to mix personal friends with business. Maybe I should get a better class of friends.

[vangogh]

I doubt we'll find any real data on this either. I tried some quick searching and haven't come close.

However you're suggesting we're only providing anecdotal evidence and supposition. You haven't provided anything more yourself. Are the rest of us being asked to show more proof than you've shown. I think we have shown more by the way. We've added psychology and logic. When a personal relationship exists prior to the people in that relationship forming a business the two relationships intermix. That's simply fact. We all bring with us our experiences into everything new.

Personal relationships shouldn't enter into business decisions. Business decisions need to be made based on the business and the business alone. Very few people can completely separate the two relationships. That's simply part of what it means to be a human being. That means for most the personal relationship is going to affect business decisions and as soon as that happens it means there's a less of a chance of making the right business decision. That's not to say you can't still make the right decision for business. It just means the odds have gone done some.

Again none of the above means that you can't go into business with a friend or family member or that there's anything wrong with a partnership in general. Good partnerships happen when the parties involved have skills that complement each other and where the partners trust each other in the areas where each is responsible. Friends and family members can certainly complement and trust each other.

You have to be aware though that you're bringing inequalities from the personal into the business.

[Spider]

...My personal preference is not to mix personal friends with business. Maybe I should get a better class of friends.Yes, if you ever want to form a partnership... but I rather gather you do not, so the question is moot. :)



...Personal relationships shouldn't enter into business decisions. Business decisions need to be made based on the business and the business alone. Very few people can completely separate the two relationships. That's simply part of what it means to be a human being. That means for most the personal relationship is going to affect business decisions and as soon as that happens it means there's a less of a chance of making the right business decision. That's not to say you can't still make the right decision for business. It just means the odds have gone done some... What I think you are failing to realise is that business only partnerships are still between people - and even these people have personal feelings. In fact, you cannot divorce personal feelings from business decisions, simply because those who make the decisions are people with personal feelings (unless you contemplate a partnership with some other entity than human beings!)

The business associate has no more nor less personal feelings than the friend or family member, but where I feel my argument holds sway is that the feelings of one are known and the feelings of the other are unknown until after the partnership is formed. Thus making the business only partnership far more risky.

I think it is a fallacy to think that business only partnerships will not have the personal relationship affecting business decisions and also I think it is erroneous to assume there's a less of a chance of making the right business decision as a result.

[vangogh]

What I think you are failing to realise is that business only partnerships are still between people

Where am suggesting the business only partnerships aren't between people? I'm suggesting they have less baggage between the partners than if the partners had a previous personal relationship.

Of course two people who go into business (without a prior relationship) are going to develop a relationship if none existed before. That relationship is going to be very different though than the business relationship they would develop if they did have a prior relationship as friends or family.

And again I'm not saying friends or family can't go into business together. I think many people are capable of of doing it successfully. I just think more aren't. Nothing I've said should be seen as a rule not to go into business with people you know. Just know that it's something important to think about and it's probably not going to be as easy as you think to separate the business and the personal.

[Spider]

What's with this separating business and personal? That's the bit I'm getting at. People do business with people. People have personalities. People you know and people you don't know, all have personalities You cannot separate the business from the personal. Every person has a personal side to them and every business decision takes place in a personal sphere. It is always "the person" who makes a business decision, whether they are friends, family, business associates or total strangers.

One does not suddenly become a non-person as soon as they step ito the workplace. Everyone has personal traits, personal hangups, personal opinions, personal idiosynchracies, personal preferences, personal likes and dislikes.

So doesn't it make sense to deal with people whose personalities you know? Personalities that you have discovered over time and through familiarity - and who do you know better than friends and family?

[Patrysha]

So doesn't it make sense to deal with people whose personalities you know? Personalities that you have discovered over time and through familiarity - and who do you know better than friends and family?

It really depends...and it all has to do with history and how the know you (and how you know them) and in what capacity.

I personally find it much easier to deal professionally with people who don't know me as well as close friends and family. Though many clients eventually morph into close personal friends, there's a different flavour to the relationship.

I'm currently in the process of trying to get a family member to consider hiring my business and it's harder in many ways than pitching to an acquaintance or a referral because of the shared history.

[Business Attorney]

So doesn't it make sense to deal with people whose personalities you know? Personalities that you have discovered over time and through familiarity - and who do you know better than friends and family?

Sure, it makes sense to deal with people whose personalities you know, but that is only one factor. I see one of the key problems in many businesses is making a tough decision. It is often hard enough to fire an employee whose performance is subpar, and when the underperforming employee is your brother, brother-in-law or next door neighbor, the necessary action becomes even harder.

If 234 AM's partner was not a friend, and 234 AM felt that his partner's inability to carry his share of either the financial burdens or the work as he has described here, would this thread even exist? I doubt it.

Generally, people form a business partnership because it appears at the time that there are good business reasons for that joint effort. If it becomes apparent that the partnership does not make good business sense to both partners, then the partners should be able to make that decision from a strictly objective viewpoint. If having a family member or friend as a partner will cause the other partner to delay or even avoid making the right business decision, then having a partner with a personal relationship is a drawback.

Does it mean that no one should ever have a business partnership with a friend or relative? Absolutely NOT. Familiarity with the person's personality can be an advantage; a personal relationship that impairs clear-headed business decisions can be a disadvantage. Even if those were the only two factors (and they obviously are not), in some cases the advantage of knowing the person well might outweigh the relationship baggage. In other cases, the relationship might be too much baggage.

[vangogh]

Frederick I'm a little surprised you don't see the issues when you mix business and personal relationship. Let me try a made up example.

Say you go into business with your boyfriend or girlfriend. After a few months you realize the business partnership isn't working and you want to end it. It's much harder now because breaking up the business relationship could lead to problems in the personal one. Or how about things are going well in the business relationship, but your personal relationship comes to an end. You may not want to be around your ex at least for a time, maybe forever, but you have this business you need to attend to. I've seen people continue either business or personal relationship when they didn't want to because of the other relationship.

How about going into business with a close family member. Most families I've been around have plenty of issues with each other. It's very easy to carry those issues into the business.

Of course no matter who you go into business with there are going to be personalities and you're going to build some kind of relationship with that person. Often those business relationships will develop into friendships too. The difference is the friendship wasn't there prior to the business and usually doesn't affect business decisions. They could and in time it does happen for some. However that's the case with all business relationships. When you have a prior personal relationship you only increase the odds something could go wrong.

[Spider]

Frederick I'm a little surprised you don't see the issues when you mix business and personal relationship...I'm not saying there are no issues. I'm saying any such issues exist whether you are partnering with a friend/family member or a stranger. Problems of this or a similar nature may arise with whomever your partner is.

In your example--boyfriend/girlfriend. A stranger could have a boyfriend/girlfriend and that relationship could turn sour affecting your partner in the business. You may not be involved but you still have to deal with it.

If your boyfriend/girlfriend is not a partner and problems arise in the business, such problems are just as likely to flow over into the personal realm. You have to deal with that.

If your boyfriend/girlfriend is a partner and problems arise in the personal sphere, they will surely carry over to the business sphere and the solution can be dealt with as one. Just the same as when your stranger-partner has personal difficulties with their BF/GF which affect their work, you have to deal with it.

Bad things between friends and family don't only affect the immediate parties to the conflict, they affect everyone associated with the parties to the extent that the parties are affected.


Re: your example of going into business with a close family member. Families may have issues and those issues are likely to be carried into the business - whether you are partner to the faily member or your stranger-partner is the one with the family issue.

Thus:-
When you have a prior personal relationship you only increase the odds something could go wrong.I do not agree.


All in all, I think this is being blown out of proportion. Business - indeed, life - is a series of challenges to be deallt with. I do not like to think of them as problems to be solved - rather game strategies to be played. Imagining the worst is not conducive to creating success. Far more important is picking the right people to be on your team, and number one criterion is picking people with whom you can reach sensible accord even in the worst situation. Low on the list of criteria is whether they are prior friends or family members.

[Harold Mansfield]

Yes, if you ever want to form a partnership... but I rather gather you do not, so the question is moot. :)

I'm not against forming a partnership. Up until now, I haven't been presented with anything , from anyone who brings something to the table that compliments what I already know how to do or that has the dedication.



What's with this separating business and personal? That's the bit I'm getting at. People do business with people. People have personalities. People you know and people you don't know, all have personalities You cannot separate the business from the personal. Every person has a personal side to them and every business decision takes place in a personal sphere. It is always "the person" who makes a business decision, whether they are friends, family, business associates or total strangers.

One does not suddenly become a non-person as soon as they step ito the workplace. Everyone has personal traits, personal hangups, personal opinions, personal idiosynchracies, personal preferences, personal likes and dislikes.

So doesn't it make sense to deal with people whose personalities you know? Personalities that you have discovered over time and through familiarity - and who do you know better than friends and family?

Of course you can deal with people you know, but when it comes to the money, the friendship takes a back seat.

I think the problem here is, partnerships with friends and family have the potential to be one sided and muddies decisions that would otherwise be executed without question.

A partnership between to separate entities with no previous personal relationship can be handled without any guilt or personal hang ups.

I can sue a business partner without guilt, but I'd be reluctant to sue a friend or family member.

[Spider]

I'm not against forming a partnership. Up until now, I haven't been presented with anything , from anyone who brings something to the table that compliments what I already know how to do or that has the dedication...That is understandable. There's another side to this coin, though. Why wait for someone to present an idea to you? You could be the one looking for a partnership. You seem to know what you want in a partenr - at least, you certainly know what you don't want. If you accept the notion that you can achieve more in partnership with another, and assuming you want to achieve more, you can be the one that does the presenting - and in so doing, be the one that picks the potential partners.



...Of course you can deal with people you know, but when it comes to the money, the friendship takes a back seat...1) If your friend/partner is of the same mind, you won't have any difficulty on this score.

2) Otherwise, why should it take a backseat? If I am going to be making more money in a partnership than on my own, I would prefer that a friend of mine shares that wealth rather than a stranger. How about you? How much of a friend are you to your friends?



...I think the problem here is, partnerships with friends and family have the potential to be one sided and muddies decisions that would otherwise be executed without question...Any partnership has that potential. Am I going to become a hermit because of the potential of being run down on the highway if I go out?!



...A partnership between [two] separate entities with no previous personal relationship can be handled without any guilt or personal hang ups...Why more so than with a friend/fam.member partnership? If you are going to do what is right, be fair and reasonable, helpful and encouraging, etc. etc. why would the status of your partner have any bearing on your behavior?



...I can sue a business partner without guilt, but I'd be reluctant to sue a friend or family member.Surely any law suit would depend on the merits of the case, not on the status of the parties. In any case, having spent 30 years in the litigious end of contracting, and having successfully negotiated every dispute that arose, I am of the opinion that the only people who win in a law suit are the lawyers, so I recommend you be reluctant to sue anyone, unless you want to spend your money out of spite!

[vangogh]

A stranger could have a boyfriend/girlfriend and that relationship could turn sour affecting your partner in the business. You may not be involved but you still have to deal with it.

Seriously? You really see no difference between what you're describing and my example? There's a huge difference when you have a strong personal investment in the relationship, especially a relationship that existed prior to the business.

Are you just disagreeing for the sake of disagreeing like usual or do you really not see the difference? Let my try again to stress the difference.

In your example only one of the two partners is in the relationship that is having issues. Of course that relationship affects the person, just as everything that happens in anyone's life affects them. In my example two if the two partners in the relationship is having the issue and even more the issue they're having is between the the partners.

Once again.

Your example: One partner is having an issue in their personal life and not an issue with their business partner. The business and personal relationships are separate. Business decisions don't affect the personal relationship, at least no more so than any decision affects any relationship

My example: Both partners are having an issue in their personal relationship and the issue is with each other. The business and personal relationships are mixed. Business decisions have a huge affect on the personal relationship, so much so that you're likely to make those decisions based on your personal relationship than you are the business relationship.

[Spider]

VG, You are picking one possible scenario out of a zillion possible scenarios between two partners in a business, and - it seems to me - using that to consider all friend and family-member partnerships more risky than partnering with a stranger. (I acknowledge that you have not said NEVER partner with a friend or family-member, but you have deemed them all more risky.)

I say, the unknown nature of how a stranger-partner will react in any number of potential situations is far more risky, both in extent and intensity.

What would be the worst possible scenario that could occur between two partners of any status? Yes, the BF/GF break-up would be up there, but I can think of several others that would be far more devastating personally and professionally - large-scale and long-term imbesslement would more devastating personally, I think. Late-term discovery that one's partner does not have the knowledge, acumen and qualifications they said and are not as competant as first seemed, would be more damaging to the business.

Furthermore, supposedly 50% of all marriages in the US end in divorce, so I reckon that BF/GF breakups are even more numerous. I cannot believe that even a bare majority end acrimoniously and even mariages of many years end pleasantly with the exs being friends and even dating on occasion. So even a BF/GF partner break up does not have to end badly or affect the business to any great extent.

I restate:
All in all, I think this is being blown out of proportion. Business - indeed, life - is a series of challenges to be dealt with. I do not like to think of them as problems to be solved - rather game strategies to be played. Imagining the worst is not conducive to creating success. Far more important is picking the right people to be on your team, and number one criterion is picking people with whom you can reach sensible accord even in the worst situation. Low on the list of criteria is whether they are prior friends or family members.

Also, as you seem to think I am ...
...disagreeing for the sake of disagreeing like usual ...(your words, my emphasis) I will let this be my last comment on this topic. Just because you have failed to convince me of your fundamental reasoning, which I find logically erroneous and personally self-limiting, does not mean I am disagreeing for the sake of disagreeing. I am disagreeing because I think you are mistaken. Neither do I usually argue for the sake of arguing - I only argue when my opponent's point is not proven.

[vangogh]

My apologies for suggesting you only disagree to disagree. That's not fair of me to say. However I would say it sometimes comes across that way at times, though I take it's not intended to come across that way. My bad for suggesting it.

Sometimes it comes across to me as though you aren't willing to acknowledge other people's points. Again perhaps that's just my interpretation. For example in this thread I find it very hard to believe you don't see a difference between one partner having an issue with a significant other and both partners having an issue with significant others who are also each other.

Like David said this thread likely doesn't exist if 234 AM and his partner were not friends prior to going into business together. In 234 AM's own words.


I told him I thought it wise for me to pay him off for the tools and go on my own and he threatened, and I quote:"I dont see our friendship lasting long if you do". So after a lengthy discussion I agreed to stick it out but made it known that he had better start bringing some money and hard work to the table.

Isn't it clear that the existing friendship is causing the issue? His partner is using it as a weapon to get what he wants in the business and 234 AM is going against what he thinks best for the business for the sake of the friendship.

If you hold the view that prior personal relationships are generally not that big a deal in regards to the business and how the partners manage the business and make decisions about the business that's fine. It's something we can discuss and offer thoughts on both sides of the issue.

However to not even accept there is a difference when there is a prior relationship and that the prior relationship can cause additional problems for the partnership (especially when the person who started the conversation is telling everyone that's the issue) comes across as you not willing to acknowledge any point of view that isn't your own. Again my apologies if that's my interpretation and not what's actually happening. I just want you to understand how it comes across to me.

I think you make a lot of valid points. I also think you can be quick to dismiss other people's points unfairly at times. One last time my apologies if that's my interpretation and not your intention.

[Steve B]

VG - You've been caught in the Spider web. Try and try as you might ... there is no way out .... eventually you will just have to give up.

[Spider]

Thank you for the feedback, VG. I will more clearly acknowledge the points you make, and offer argument that is more specific and less like dismissal.

[vangogh]

Thanks Frederick. And in case it isn't clear, I really do enjoy the back and forth we have. You have a lot of interesting thoughts and I think it's great how you can bring a different perspective to many topics. This one for example I wouldn't have thought as many of the top companies listed would have started out as partnerships in general, let alone partnerships with friends or family.

[Spider]

Thanks Frederick. And in case it isn't clear, I really do enjoy the back and forth we have. You have a lot of interesting thoughts and I think it's great how you can bring a different perspective to many topics. This one for example I wouldn't have thought as many of the top companies listed would have started out as partnerships in general, let alone partnerships with friends or family.

Ditto .... :)

[Cookie]

This is the most enlightening thread I have found anywhere online about business dealings with friends.
You all seem to be a wealth of info.
I am a brand new member and wonder if I give you my scenario in another
thread if I can bounce some ideas off of you.
By the way, I know I gave myself the most foolish of all usernames, but it IS well past my bedtime and I have no creativity left from the day.
I am so on board with the author of this thread it's almost uncanny we have MUCH in common with a few drastic differences (mine is a 10 year old partnership that I am fed up with) , and I don't want to steal his thread.

[KristineS]

Cookie,

Welcome to the forum. Go ahead and start a new thread. We'll be happy to discuss things with you.