15 Tips How to Structure a Business with a Friend

Starting a business with a friend seems like a brilliant idea, right? You trust them, they get your jokes, you know their coffee order, and working together feels like it’ll be a breeze.

What could go wrong? Well, everything. But also, if you’re smart about it, nothing. 

Handling business partnerships with friends can be a delicate process. You’ve got to juggle personal dynamics, differing ideas, and the ever-present threat of mixing friendship with finances. Fun stuff, right?

So before you start shaking hands (or pinky swearing, no judgment), let’s get real about how to structure your business in a way that doesn’t have you side-eyeing your buddy at your next BBQ.

If you’re going to build something great together, it needs to be built on more than sole friendship. You need a solid foundation—think of it like relationship therapy but with spreadsheets and contracts.

What Could Possibly Go Wrong?

Starting a business with a friend can go both ways. When things go south, they go south.

So why do it? Why risk it all with someone you care about? Because when done right, it can be amazing. You already have the trust factor, and if you’re both on the same page, you can turn your friendship into a money-making machine.

But first, you need to address the potential pitfalls head-on and make sure you’ve got the right structure in place to avoid awkward Thanksgiving dinners where no one’s making eye contact.

Let’s break down the first steps of structuring your business partnership in a way that keeps both your business and friendship intact.

How to Structure a Business with a Friend

There are smart ways to structure a business with your friend so you don’t end up clashing when things get tough.

Here’s a breakdown of the 15 steps to make sure you both stay on the same page (and stay friends).

1. Clearly Define Roles

Decide who’s doing what. Just because you’re friends doesn’t mean you can “figure it out as you go.” That’s how misunderstandings happen.

One of you might be silently fuming while the other is kicking back, thinking everything’s peachy. You need to map out responsibilities right from the start.

Maybe one of you is better at finances, while the other is a marketing whiz. Whatever the case, make sure it’s clear who is handling what. Having well-defined roles from day one keeps you on track and avoids detours like, “I thought you were doing that.”

• Map out responsibilities: Make a list of tasks and decide who is in charge of what, based on strengths and interests.
• Title matters: Assign official titles that reflect each person’s role to avoid confusion or overstepping.
• Stay in your lane: Once roles are defined, respect them. Micromanaging your friend is a fast track to disaster.
• Adapt as needed: If things shift, update roles and responsibilities to fit the new dynamic, rather than letting resentment build.

2. Have the Money Talk Early

Money is often the reason friendships fall apart in business. You need to be upfront about how much each person is contributing and how profits will be split. 50/50 might sound fair, but does it actually reflect the effort, time, or resources each of you is putting in? You don’t want one person feeling shortchanged down the road.

Also, don’t forget to talk about salaries. When do you start paying yourselves? And how much? These are not fun conversations, but they are critical. 

• Set clear financial goals: Discuss profit margins, reinvestment strategies, and personal financial expectations.
• Decide on contributions: Whether it’s sweat equity or cold hard cash, agree on how much each person is putting in.
• Agree on compensation: Talk through when and how you’ll get paid, even if the money isn’t flowing in yet.
• Discuss financial worst-case scenarios: What happens if the business loses money? Better to figure this out now than when you’re scrambling later.

3. Set Clear Boundaries: Friendship vs. Business

Mixing business with pleasure can get weird. You’ll need to find common ground between the casual “we’re friends” vibe and the “this is a business” seriousness. This means setting boundaries.

Maybe you’re used to texting each other memes all day, but now that you’re business partners, you’ll need to differentiate when it’s business hours and when it’s friend time.

Establish rules like: “No talking about work during Sunday brunch” or “If we’re arguing over a business decision, we leave it at the office.”

Easier said than done, but essential.

• Schedule non-business hangouts: Make time for friendship outside of work to keep things balanced.
• Establish “business-only” hours: Define work hours to prevent business talk from seeping into every text and dinner.
• Agree on how to handle disputes: When things get heated, remind each other to leave personal feelings out of it.
• Keep communication professional: During work hours, treat your friend like a business partner, not your BFF.

4. Have a Written Agreement

Put everything in writing. No, this doesn’t mean you’re jinxing the friendship. It means you’re protecting it. A written agreement will clarify expectations, resolve potential disputes, and ensure both of you are on the same page about the business as entrepreneurs and friends.

The agreement should include things like how profits and losses will be shared, how decisions will be made, and what happens if one of you wants to leave the business. Treat it like a prenup for your business marriage—it’s there to save both your sanity and your friendship.

• Hire a lawyer: Don’t try to DIY legal agreements. Get a professional to draft one that protects both of you.
• Outline equity and ownership: Be clear about who owns what percentage of the company, and what happens if one of you leaves.
• Define roles and responsibilities: Yes, it’s boring, but putting it in writing prevents future confusion or disagreement.
• Update as necessary: Your business will evolve, and your agreement should too. Review it annually.

5. Have Regular Check-ins

It’s tempting to assume everything’s fine if nobody’s openly complaining. But if you don’t check in regularly, little issues can snowball into massive problems. Schedule regular business meetings that are strictly for business—no catching up on last weekend’s party.

Use these meetings to go over progress, review financials, and discuss any concerns or changes in the business direction. These check-ins keep everything on track and prevent resentment from building up.

Plus, they help you stay aligned as business partners.

• Set a weekly meeting: Even if everything is running smoothly, touch base regularly to avoid miscommunication.
• Track progress: Use these check-ins to review goals, tasks, and what’s going well (or not).
• Address small issues early: Don’t let small problems fester—use check-ins to clear the air before things escalate.
• Give each other feedback: This is your chance to praise your friend’s work or gently point out areas for improvement.

6. Plan for Success—and Failure

It’s easy to plan for success. After all, that’s what you’re both aiming for, right? But what happens if things don’t go as planned? This is where it gets uncomfortable, but you must discuss an exit strategy.

What if one of you wants out? What if the business is losing money? What if you just can’t agree on the next step?

Having a plan for failure is just as important as having a plan for success. It might not be fun to talk about, but it’s vitalif you want to avoid bitterness and drama down the road.

• Create a success road map: Know what the best-case scenario looks like, and outline the steps to get there.
• Develop a failure plan: Discuss what you’ll do if things go wrong—whether that’s pivoting or shutting down the business.
• Set up an exit strategy: If one of you wants out, have a plan in place to buy them out or dissolve the business fairly.
• Be realistic about timelines: Businesses take time to grow. Don’t quit your day job expecting instant success.

7. Establish a Decision-Making Process

If you and your friend don’t have a clear decision-making process, you’ll end up wasting more time arguing over small things than actually running the business. Should you use that extra cash for marketing or invest in product development? Do you need an LLC or should you start as a sole proprietorship?

Decide early on who gets the final say on what, and create a decision-making structure that works for both of you. Whether it’s a majority vote, a coin flip, or a “you get this, I get that” approach, you need a system that keeps things moving.

• Define areas of authority: Figure out who makes final decisions on different aspects of the business to avoid deadlock.
• Create a voting system: If decisions involve both of you, agree on how to break a tie, whether it’s a vote or a third-party mediator.
• Set deadlines for decisions: Indecision kills momentum—give yourselves time limits to make tough calls.
• Accept compromise: You won’t agree on everything, and that’s okay. Find the middle ground that moves the business forward.

8. Deal with Conflict Head-On

No matter how much you love each other, you’re going to clash at some point. That’s just the nature of working with someone you’re close to.

Maybe you disagree on business strategy, or maybe one of you slacks off while the other is grinding away. Whatever it is, deal with conflict as soon as it comes up.

Don’t let issues fester in the name of “keeping the peace.” You’ll end up with passive-aggressive emails and awkward silences during meetings. Address conflicts head-on, like adults—or at least like slightly more mature versions of yourselves.

If necessary, bring in a third party (a mentor, perhaps?) to help mediate. Trust me, it’s way better to solve issues quickly than to let resentment pile up.

• Don’t avoid tough conversations: If something’s bothering you, address it immediately before resentment builds.
• Set a time and place: Don’t argue in the middle of a workday or over text. Schedule a time to calmly talk things through.
• Use “I” statements: Avoid sounding accusatory by focusing on how things affect you, not what the other person is doing wrong.
• Bring in a mediator if needed: If you can’t resolve the issue on your own, enlist a third party—someone objective—to help.

9. Understand Each Other’s Strengths and Weaknesses

You and your friend aren’t perfect, and pretending you are will only lead to disaster. One of you might be great at managing finances, while the other is really bad at it. Or maybe one of you is a creative genius, but can’t organize a filing cabinet to save their life.

Be brutally honest about your strengths and weaknesses, and divide responsibilities accordingly. This way, you’ll complement each other instead of stepping on each other’s toes.

And when one of you messes up (because it’s going to happen), it won’t feel like the end of the world because you’ll know where the weaknesses are and be prepared to handle them.

• Do a skills assessment: Sit down and list each person’s strengths and weaknesses honestly, without ego.
• Delegate smartly: Once you know where your weaknesses lie, delegate tasks accordingly—this makes both of you more effective.
• Offer support: Just because your friend is handling something doesn’t mean you can’t offer help or advice when needed.
• Acknowledge limitations: Understand that neither of you is perfect, and embrace the idea that together you’re stronger.

10. Don’t Forget About Growth (Both Business and Personal)

Starting a business isn’t strictly about the business itself—it’s about growth, both for your company and for you as individuals. You’ll learn a lot along the way, and that’s a good thing. Just make sure you’re both committed to personal growth, too.

If your business grows but one of you refuses to evolve with it (or worse, resist change), it’s going to create friction. Discuss how you both want to grow, professionally and personally, and make sure your goals align.

Maybe one of you wants to be hands-on forever, while the other dreams of outsourcing everything. You’ve got to be on the same page here, or things will get ugly.

• Invest in personal development: Attend workshops, take courses, and read books to keep improving yourself.
• Encourage each other’s goals: Stay supportive of each other’s personal and professional growth.
• Evolve with your business: As your company grows, reassess roles and adapt based on new needs and skills.
• Don’t get stagnant: If things feel repetitive, shake them up—whether it’s through new strategies or personal growth.

11. Set Milestones

Success looks different to everyone. To one person, it might be turning a profit in the first year; to another, it’s opening five locations by year three. If you and your friend don’t have a shared vision of success, you’re in trouble.

Set clear milestones—both short-term and long-term—so you know where you’re heading.

These milestones will keep you motivated and give you something to celebrate along the way (and trust me, you’re going to need those celebrations). Plus, when things get tough, it helps to remember the wins and how far you’ve come.

• Create short-term goals: Break big goals into smaller, manageable tasks so you can see progress.
• Track progress regularly: Set up a system to monitor your progress towards these milestones.
• Celebrate when you hit a goal: Take time to acknowledge each milestone—this keeps morale high.
• Reassess goals periodically: Milestones should evolve as your business does. Check in to see if they still align with your vision.

12. Avoid “Founder’s Syndrome”

Founder’s Syndrome happens when one person (usually the one who feels like they had the “original” idea) starts acting like they’re the sole decision-maker and visionary.

Even if you’re the one who came up with the business idea, don’t pull the “I’m the founder, so it’s my way or the highway” card.

Running a business with a friend means you’re partners, not employees in each other’s company. Avoid the power trip and keep things equal. After all, it’s not solely your business, and no one likes a dictator—especially not in a friendship.

• Keep communication open: If you feel like one person is taking over, have an honest conversation about it.
• Stay humble: Remember that the business is a team effort, no matter who had the original idea.
• Share credit: When the business succeeds, celebrate your partner’s contributions as much as your own.
• Rotate leadership tasks: Let both of you take turns leading different initiatives to avoid the “boss” dynamic.

13. Protect Your Mental Health

Starting a business is hard work, and it’s easy to get caught up in the grind. You’ll feel like you need to put in every waking hour to make it succeed. But if you’re burning the candle at both ends, your friendship and your business will suffer.

Take care of yourself, and encourage your friend to do the same. Schedule downtime, take breaks, and step away from the business once in a while.

You’re in this for the long haul, so pace yourselves. You want to build a sustainable business, not sprint to burnout.

• Set boundaries around work: Schedule specific work hours and honor your time off to prevent burnout.
• Take breaks: Even if you love what you’re doing, everyone needs time to recharge.
• Check in on each other’s mental health: Keep an eye out for signs of stress or overwhelm and support each other accordingly.
• Seek outside support if needed: If things get tough, don’t hesitate to talk to a therapist or counselor—mental health matters.

14. Think About the “What Ifs” (Because Life Happens)

What happens if one of you wants to move to another country? Or if one of you gets sick and can’t work for a while? Or worse—what if one of you wants to leave the business entirely? These aren’t fun things to think about, but they’re real-life possibilities.

Have contingency plans in place for these “what if” scenarios. You’ll both feel better knowing that if something unexpected happens, you won’t be left scrambling to figure out what to do next.

• Discuss life changes: What if one of you gets married, has a kid, or wants to move away? Have plans in place for big life changes.
• Talk about illness or incapacity: Decide what happens if one of you is unable to work for a long period.
• Agree on an exit plan: If one person needs to leave the business, make sure there’s a fair buyout or dissolution plan in place.
• Update plans regularly: Revisit these “what ifs” as your business (and life) evolves, so you’re always prepared.

15. Celebrate the Wins (Because You Deserve It)

It’s easy to get caught up in the day-to-day grind of running a business and forget to celebrate the wins—big or small. Whether it’s landing a big client, hitting your first $10K month, or just surviving the first year, take the time to celebrate.

Go out for a night, take a weekend off, or even just send each other a congratulatory text. Running a business is hard, and you deserve to enjoy the fruits of your labor.

• Acknowledge small victories: Don’t wait for huge milestones to celebrate. Recognize every win along the way.
• Find your celebration style: Whether it’s popping champagne or just taking a day off, figure out how to reward yourselves.
• Celebrate together: Make sure you’re both part of the celebration, even if one of you drove a particular win.
• Keep the momentum going: Use celebrations as a way to refuel and stay motivated for the next big challenge.

Conclusion: Business is Business, But Friendship is Friendship

Starting a business with a friend is a high-stakes game. You’re balancing your livelihood and your friendship, which makes things a little more complicated than your average startup. But with clear communication, a solid structure, and a bit of humility, it’s absolutely possible to make it work.

At the end of the day, structuring a business with a friend isn’t all that different from structuring a business with anyone else—except, you know, you actually care about this person. That makes it both harder and more rewarding. 

Sure, there will be arguments, stressful moments, and probably a few tough conversations about money. But if you’re both committed to the business and each other, the reward is running a successful company with someone you trust and respect.

A strong friendship can survive even the messiest business venture, as long as you’re both willing to put in the effort.

Don’t skip the hard conversations, and don’t assume everything will work itself out because you’re friends. Friendship doesn’t magically solve business problems.

But with the right structure, it can make running a business way more fun (and way more successful).

Ready to Learn More?

Want to sharpen your skills and make sure you and your friend are on the same page? Check out Skillshare for courses on business partnerships, communication, and leadership. It’s like Netflix for learning but actually useful.

And don’t forget to check out our book recommendations on business, partnerships, and navigating entrepreneurship with friends. You’ll find the link here.

FAQs for “How to Structure a Business with a Friend”:

1. What are the most important steps when structuring a small business with a friend?

It’s essential to clearly define roles, set boundaries between friendship and business, and establish a written agreement outlining the partnership’s expectations and responsibilities.

2. How can we ensure our friendship doesn’t suffer when we go into business together?

Regular communication, clear boundaries, and separating personal from professional matters will help maintain both your friendship and business relationship.

3. Do we need a formal business plan when starting a business with a friend?

Absolutely. A business plan is vital to ensure both partners are on the same page regarding goals, finances, and future growth.

4. What happens if one partner wants to leave the business?

It’s important to establish an exit strategy in your agreement from the start. This should outline what happens if one partner decides to leave and how their share will be handled.

5. Can a business with a friend be as successful as other entrepreneurial ventures?

Yes, if structured correctly. Just like any other business, success depends on clear communication, defined roles, and aligning on the vision for a successful business.

6. How do we assign roles and responsibilities without stepping on each other’s toes?

Understanding each other’s strengths and weaknesses is key. Assign roles that match your skills and discuss areas where you may need to step in to help one another.

7. Is it possible to maintain a healthy business relationship while running a company with a friend?

Yes, as long as both parties treat the business professionally and handle disagreements maturely and constructively.

8. Should we consider bringing in a third party for conflict resolution?

If disputes can’t be resolved between the two of you, bringing in an outside mediator may seem like the best solution to maintaining both the friendship and the business.

9. What if we have different visions for the future of the business?

This is why regular check-ins and updates to your business plan are crucial. As your business evolves, it’s important to revisit your shared goals and make sure you’re still aligned.

10. How do we protect ourselves from “Founder’s Syndrome” when one partner starts to dominate?

Open communication is critical. Rotate leadership roles and decision-making responsibilities to ensure both partners feel equally involved and valued.