One of the things many entrepreneurs hope to do one day is to go into business with their family.  Although this is a very noble goal, to go into business with the people you love the most on this earth, it can often turn into a disaster.  Therefore, if you are contemplating going into business with family, or if you have already gone into business with family, there are a few key tips that can help make your experience a rewarding one.

Borrowed Money Must Come with Terms

No matter which side of the coin you are on when it comes to borrowing money from family for a business there are a number of key principles you need to make sure you follow.

First, if the family member does not qualify for a bank loan, or a loan from a regular financial institution, be very careful lending them money.  Banks are in the business of borrowing money and getting it all paid back with interest.  If a bank is unwilling to give a loan to your family member there might be a reason for it that your family member isn’t telling you about.  For example maybe their credit score is to low because they have had a history of not paying back loans, or maybe it is just because the banker can see there is no true business model in the investment your family is pitching you on.

Second, you need to make sure you are charging interest in accordance with the risk you are taking.  For most of you, you are not in the business of lending money; therefore, if you decide to lend money to a family member it is going to be a much riskier proposition for you than for a bank.  You need to get paid for this through a higher interest rate.

Third, make sure you get security and you get the loan in writing.  All too many family members believe their family would never stiff them, yet it happens all of the time.  The best way to increase your chances of getting paid back are to make the borrowing party not only sign the loan, but also personally guarantee it.  If they are unwilling to do this to protect you, then there is no reason you should be going out on a limb to risk your assets for them.

Separate Family from Work

All too many family businesses struggle with this one concept.  They cannot separate their families from their office and it creates a few problems.

First, it can cause major problems with other employees.  It is very hard for your good employees to stay motivated if you are always making special allowances for family members.  For example if you have a policy that your employees must be on time or they will be subject to consequences, yet your family member comes in late every day and you do nothing about it.  This sends a horrible message to your other employees of how little you really think of them.

Second, if you are in business with a spouse or someone who lives in your home, you have to have down time.  As a result, you have got to be able to leave work at work some days or you will find your personal relationships will suffer.  We all deal with the stresses of owning a business differently, but if your safe haven has always been your home and now you are in business with your spouse and they are bringing home work problems every night, you are going to find this very frustrating and damaging to your relationship.

Hold Each other Accountable

You can’t let things slide just because someone is family.  If you have family members in your business you need to make sure they are pulling their weight.  If they are not, it is your job to set them down and let them know what is expected and the consequences that will occur if they don’t start pulling their weight.  As hard as it might be to fire a family member, I can tell you from the clients I have talked to it ultimately is much easier than losing your business because the family member pulled everyone else down in the organization.

So whether you are already in business with family, or just looking forward to the day you can, remember the above and always remember that the best way to resolve any problem is to communicate with all parties involved.

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