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Keys to success when starting a family business

Many people dream of starting a business with one or more family members, but some never take the leap because of the challenges and potential to ruin their personal relationship.

Starting a family business can be a straightforward process if you know the steps to take. Here are five things you should do before you open your doors:

  • Clearly define roles: With so much excitement surrounding your new business, it's often difficult to find time to take a step back and define the roles of each owner. Doing this up front avoids future confusion, while keeping everyone on the same page.
  • Clearly define compensation: Money complicates everything, so make sure you discuss it right off the bat. Will all owners earn the same amount of compensation? If not, how will you calculate it? What happens to additional profit? Clearly outline how compensation is awarded and address any questions or concerns.
  • Define who owns what: Just because you're starting a family business doesn't necessarily mean everyone has the same stake in the company. For example, if there are two of you starting the business, decide if it will be a 50/50 partnership or some other arrangement.
  • Create a contract: It's easy to believe that a contract is overkill when working with your family. However, just the same as other business partners, you can run into complications and disagreements along the way. With a contract in hand, everyone knows what's expected of them. It also helps cut back on legal costs should you face a serious disagreement.
  • Create an exit plan: You're just starting your family business, so it's not likely that you'll want to turn your attention to exiting just yet. But it's critical to think about this initially, as an exit plan for each family member improves the likelihood of a smooth transaction should one or more individuals want to move on from the company.

Working with family, especially if you're the owners, is easier said than done. But with many benefits, it may be something you're strongly considering.

By touching on the five points above before launching your family business in Austin, you're in better position to hit the ground running and avoid complications down the road.

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