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Deciding to go into business with family is an exciting decision that can bring out the best and worst in your collective relationships. There are numerous examples of family businesses that have developed into world-conquering brands: Walmart, Fiat, and the headline-ridden NewsCorp to name but a few. However, what history doesn’t tell us is just how many families have been left in tatters by business partnerships that were never meant to be. To put it simply, a family business raises the stakes and turns simple profit and loss in to a mere afterthought if planned naively. It’s important to be fully prepared before venturing in to any business agreement, especially when you have an informal background with your new partner. What feels like a proposal of mutual benefit today, can rapidly descend in to a personal rift of epic proportions if the ‘terms and conditions’ aren’t as airtight as they would be in any other professional contract. I have one piece of advice for doing business with families and friends: favors do not work. Even if your closest cousin offers you a zero-interest loan with the best of intentions, you probably shouldn’t take it. That is not to dispute the generosity of your loved ones, but to live by a simple truth that businesses fare better where all parties concerned believe that their deal is the best. Everybody should get a fair deal, including those who do you a favor when the banks won’t budge. Especially those people! Banks are notoriously picky about lending money, and angel investors are tough to find on the average street corner, so gaining investment from family and friends is often a convenient road for the entrepreneur. In order to avoid a devastating fall-out with your friendly investors, clarity and transparency are the orders of the day. Draw up exact terms of repayment and systematically dismantle any sense that a favor is owed. Even if you’re taking money from your own mother, be professional and treat the investment as if you’re working with Lord Sugar on The Apprentice. The chances are, if you feel guilty about accepting an investment, the investor is feeling regretful about jumping so eagerly into bed with your business. Make sure that regret is never an issue. What about adding family members to an already successful business? In many situations, once you’ve established a profitable business, you will find that your friends and family come crawling out of the woodwork in search of a job that gets them away from the office cubicle. This is always a tough situation, and I stand firmly by the view that relationships are best kept out of businesses where they haven’t existed since day one. You have to be ruthless. If this means hiring a stranger over your jobless aunty who ‘needs a favor to pay the mortgage’, then unfortunately, so be it. A weak stance will put your own mortgage in danger. There will be instances where the best person for a job genuinely is your friend or relative. In these situations, where applicable, make every attempt to insulate yourself from the management process. If you have a project manager or a senior partner, make the friend or family member report to them rather than yourself. It’s very common, if the relationship isn’t entirely professional, for a worker to start taking liberties based on what he sees as immunity to strict employment guidelines. Your friend may start to enjoy extended weekends, or late arrivals in to the office, or simply the luxury of balancing his own odd-jobs with your designated hours on the clock. These situations are much less likely to arise if you are insulated from the management process, and the friend or relative reports directly to somebody else. If you can’t guarantee such a work structure, be clear that personal favoritism flies out of the window where work is concerned. When the warnings go unheeded, be prepared to fall on your sword by accepting responsibility for damaged relationships if termination is necessary. If this sounds like a scaremongering bid to deter you from going in to business with family, that is not the intention. Family businesses built on the right foundations have proven through the years to be some of the strongest in the world. They comprise loyalty, a sense of shared ambition, and in some cases an invaluable sixth sense. If you instinctively know the strengths and weaknesses of your business partner, and investors, you can concentrate efforts for maximum return. For many entrepreneurs, the actual concept of building a business is deeply rooted to leaving a legacy for future generations. What better legacy than a successful business to pass down to your children? Family is usually a much greater influence than most entrepreneurs give credit to. Even if you don’t consider your business to be family orientated in 2011, your views may well change with time! Martin “Finch” Osborn is a marketing entrepreneur who started his own business at 21, and now works from a laptop while traveling the world. He is a fierce critic of the “get rich quick” online phenomenon. Read more about Finch here .