Forums: Discussions for entrepreneurs and small business.

Hi All,

I`m in the development stages of an e-commerce website with my best friend. We have been friends for over 16 years and I trust her. With this said, I`m nervous about legally coming together under a business structure (ie; s-corp or llc). My friend has a bad credit history and I need to know if having a limited liability structure will protect me & the business from any personal problems she has.

Also if you have any sugestions for a better partnering structure please let me know.

Lastly, if you have an opinion of s-corp vs. llc please let me know (these things get very confusing).

Thanks so much,

Sharon

 

Hiya Sharon,

Well, I`m sure you`re aware of the risks with going into business with a good friend.  You should go into your venture knowing that at the very least, your friendship will be dramatically changed, and that there`s a better than average chance that your friendship will suffer as a result of your business together.

That being said, if you`re still willing to take the plunge, your friend`s bad credit history may be a sign of her challenges in running a business.  But if you establish a separate business entity like an LLC or corporation, the general rule is that the owner`s personal assets and liabilities are not at risk by the business` activities.

One twist to this is that if you`re seeking a loan, or plan on leasing real estate, a creditor or landlord will typically want personal guarantees from the owners of the new business.  If your friend has a poor credit history, that may complicate the process.

Regarding S-corp vs. LLC, there are numerous issues to consider (I usually discuss about 10 areas with my clients):  taxes, administration, ownership structure, transferability of interests, record keeping, just to name a few.  Also, if you`re starting an ecommerce website, you`ll want to think about online terms of use and a privacy policy.

Good luck!
Dan


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Pepper Law Group, LLC
21 E. High Street, Suite D
Somerville, NJ 08876
informationlaw.com
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The Legal Considerations of Starting an Online Business

From personal experience friends and businesses dont mix. I took a friend into a business years ago as a 50-50 partner. He was having credit problems and given the friendship felt it okay to take a little more out each week than was agreed. In the end no business and no friendship.

When entering a partnership you need to be truly partners and when issues exist the friendship cant influence or sway your business decision. If you cant do this then dont get into the partnership.

My 2 cents worth...over to you.

 

 

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Business Development Services

I would suggest visiting http://bizpartnerhunt.com in search of a business partner. They have a lot of tips from drawing up partnership and legal agreements to performing background checks on potential partners.

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Kesha G. Brown
BPH Marketing Assistant: Contact via email
www.BizPartnerHunt.com - Post & search FREE ads to find a business partner or investor

I am currently considering going into business with a friend but not as a full on partner, but as an upper level employee.  This has made a huge difference in our continued conversations about bringing her on board to help grow my business.

Jennifer