To an entrepreneur looking to start a corporation, friends and family may seem like an ideal choice for partners or coworkers in the new business. But starting a company with people you know can also create several challenges, according to Wall Street Journal blogger Gautam Gandhi.
He says that from the first days of the company, there needs to be one boss to whom everyone else is accountable. A lack of a clear authority figure creates a lack of responsibility throughout the organization. Once the CEO is set, creating a succession plan will prevent problems should that person decide to leave.
It’s also an important step to maintain the formality of employment contracts and other procedures when working with friends. He adds that while it may seem awkward to have friends sign a contract, it can prevent bigger issues down the road if there is a personal conflict.
Forming a company with friends or family can work out well in many situations because of the trust their relationship has already built. Friends Larry Page and Sergey Brin came together to form Google, while friendships were also the driving force between Microsoft and Apple.
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