My answer to How do you handle business with friends?
Answer by Ken Larson:
Business with friends is possible if communication, expectations and understanding of the enterprise is documented in the form of agreement on paper.
An operating agreement is a good example among friends who become owners of a business.
It is not controlled or required by the state or the federal government but very important to your company. It should be a simple, straightforward document you and you and your prospective partner(s) can draft yourselves. It should cover such matters as % of ownership, how revenue will be distributed and other general matters, as well as who can commit the company in the form of credit cards, who signs checks on the company account and other administrative matters. Buying out a partner should also be covered.
I have seen many enterprises fail or go through terrifically hard times due to lack of an operating agreement. The parties should sign it after a review by a lawyer. It should then be notarized and made an official part of the company file.
A free sample operating agreement with instructions is at the References file in the Box in the left margin of the following site: