Pas de D’oh*
Avoiding Business Missteps with Friends

Zen Mensch Accounting

Hip, Hop and Henry have a brilliant business idea: multi-lingual ballet shoes that guide the dancer in Russian, French and English. They do well, then a disgruntled Hop announces he is  skipping out to start a similar enterprise, and wants his money and equipment back.  The new business has no cash and  their records on who gave what are not exactly crystal clear. It gets ugly and legal. They had no business agreement.

Whether you are a corporation, LLC or partnership it is vital that you detail in writing how you will operate — make decisions, pay yourselves, pay taxes, leave the company – all the stuff you would rather not think about, especially if you were comrades to start.  You trust each other, right?

Yes, and that’s the point. Going into business can enhance or destroy a great relationship. Strong and differing opinions can be tremendous for growth.  But before you jump in you must work out a framework for how you will operate the company — in good times and in bad.  Don’t wait until your livelihood (and friendship) is on the line.

Have you been in a business relationship gone sour and learned a lesson you want to share? Contact me.

For a fuller example of the issues you should address in a business agreement, read “Painted Into a Corner” here:. For a look at some of the issues to consider if you want to incorporate, click here:

* In ballet, “pas de deux” is a type of dance for two people. “D’oh” is Homer Simpson’s elegant way of acknowledging a mistake. I didn’t know about “pas de deux” until yesterday. You are not alone.

NOTE: Every situation is different and federal and state tax laws are subject to change.  This article is presented exclusively for informational purposes and is not intended to substitute for obtaining tax or financial advice from a tax or other business professional.

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