Understand This Before Joining the Family Business Our expert suggests getting a formal operating agreement hammered out before investing time or money in the venture.
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My mom has been the sole proprietor of her profitable restaurant and bar for 30 years. I'm one of three siblings and my sister is currently the restaurant's manager. Mom wants to sign the business over to us, and we were wondering, how we can best organize the proceedings to make it an equitable partnership?
Going into business with family can be difficult so it's important to get everything in writing and not relay on a handshake.
The best way to solidify the partnership is to get a lawyer to generate an operating agreement. This objective document acts as the "law of the land" and reduces the personal tension that may arise from disagreements on roles and responsibilities. The agreement will properly structure and organize the ownership rights, financial equity, responsibilities and set forth the plan for which you and your siblings will work together. This will become the guiding document for which all decisions can be made and how all disputes can be resolved. It comes in handy not just to get on the same page with your partners regarding decision making but it also helps to police the partnership.
The document should also provide guidance for those looking to leave the business. Running a restaurant is very stressful and you might change your mind about it after a few months. Provisions for non-competes and first rights of refusal for selling shares can allow any member to walk away without hurt feelings.
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