Thursday, February 21, 2013

SOMETHING MY MOTHER DIDN’T TEACH ME

My mother taught me many useful things; treat people kindly, do your share of the work (like washing the dishes), be organized.  But one of the things my mother did not teach me was “do not go into business with family members”.  In the 45 years that I have been in business and advising others I have to admit that I have seen a few successes in family business.  At the same time I have seen a hundred failures.  Surprisingly, the failures usually are the result of loving our family members and believing that love cures all ills.  I always advise that before entering any business, especially a family business, you need to write up a detailed operating agreement.  The agreement should cover things like who is putting up the money and how much, who is doing the work, how are decisions made, and how will things be divided up when the business ends.  The problem with family businesses is that if we do not spell out everything in advance, we not only lose a business deal when things end, we may also lose the family member.  So even though I am not your mother, take this advice and prepare a very detailed operating agreement before entering into any business, but especially before going into business with a family member.
Loren L McCann, CPA, MS(Tax)

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