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My sister as my business partner?

14th Jun 2013
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My sister and I get on. She is a year older than I am. She is a really bright and an incredibly hard working person.

She was working in a senior poistion in industry. She just had enough of corporate life, constant restructuring of organisations and all the agro involved with this. She quit her job last week.

Yesterday evening we started discussions if we could work together - she joining my practice.

She is not an accountant and does not have accountancy experience. She has a MBA and a PhD. I have no doubt she will be able to do the work after training.

We are continuing our discussions. The key points we will discuss/todo

1) A clear exit strategy in the event things do not work out.

2) shop front move - is this the way she wants to go?

3) Our respective roles

4) A business plan ( that includes marketing)

5) our ideas on expanding the practice

I am positive about this. I think this could really work.

I would appreciate your thoughts on the following:

1) are they any areas I am missing on my discussion list above?

2) what are the downsides that I have not thought about?

3) your overall views would be appreciated.

Please feel free to be brutally honest on this subject.

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Replies (28)

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By wilcoskip
14th Jun 2013 08:13

What level and at what share?

You sister is clearly very bright, but I've known people brighter than me who didn't manage to make it through their training contract.

Even if (and ok, she probably can) get her head round the work to a high level, it will still take time.  Will she be happy having the remuneration of an apprentice or trainee during the time it will take her to get up to speed?  Is she planning on doing any formal courses or training?

I have no objection to working with family in principle (although I could never do it myself due to the people involved, one of them being me) but fallout or disagreement in the office could easily spill over and tarnish family relationships, which you hold dear.  Very clear guidelines need to be in place.  Even as partners, you may need to provide for a period of time in which, in the event of a disagreement, you get the casting vote in certain areas.

Interesting.

WS.

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FirstTab
By FirstTab
14th Jun 2013 08:58

WS
Thanks really helpful points.

Please keep it coming.

This is directed to all readers - would it best to use a professional (broker?) to draft a legally binding agreement and agree on how she could come into the partnership. Bring in some capital?

Any recommendations as regards who to use would be appreciated.

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By petersaxton
14th Jun 2013 09:02

My view

Money!

You don't mention her remuneration and share of the business.

Will she pay for her shares?

It could be good to have somebody you respect and are close to. It would make your position less lonely. The downside is massive if it doesn't work out. It is difficult if you don't see eye to eye. The exit strategy has to be very clear and acceptable to you.

I think it will be a good opportunity to push your need for systemisation of the practice.

You will need an agreed business (and marketing plan).

If you are going to expand then it is more likely you will need a shop front.

The extra finance possible could be helpful.

 

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FirstTab
By FirstTab
14th Jun 2013 09:18

Peter
Thank you for your help.

We have not talked money. As you indicate this is one key area we need to discuss.

I think we will need outside help to thrash this out.

Any recommendations by anyone would be appreciated.

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By Old Greying Accountant
14th Jun 2013 09:33

From what I know of you ...

... this may be dangerous, sounds like she is efficient and organised and would not tolerate your approach to your work and I fear there may be many heated arguments.

My feeling is you need someone to organise and motivate you and someone to do the mundane. I think a family member may not be the best one for the former (certainly if she is a stakeholder), and she is probably less inclined to do the mundane than you are as she will not find it challenging either.

Not saying do or don't, it may well work out, just giving an angle that you need to consider dispassionately, and very carefully and thoroughly.

I think the fact she is "an incredibly hard working person" may lead to friction, I may be wrong and it may be the catalyst you need, but to mis-quote Yeats - tread softly, as she may tread on your dreams!

The reason you get on well may be that you are chalk and cheese, this may not translate to a working environment.

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By Henry Osadzinski
14th Jun 2013 09:31

Agree with Peter

I don't have direct experience with it but others in my family have started businesses or gone into business with friends & family and the big thing they said, regardless of their relationship, was make sure you have a plan for what happens if someone isn't happy and/or wants to get out.

It may be totally unforseeable now but it keeps the working relationship clear, makes sure any divisions of labour are agreed before they become sticking points, and means a professional disagreement doesn't turn into a personal falling out as much as possible.  Having an impartial third party to help check that over could be a good idea as they may spot things that you both could have missed.

Other than that it sounds like an interesting opportunity for the both of you - best of luck!

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By mrme89
14th Jun 2013 09:34

Be prepared about talking to your sister about money, it could be a very awkward situation.

 

She doesn’t have accountancy skills, you have those. However, it does seem like she has the potential to bring a lot to the business.

 

You need to think where you see your practice in 1, 3, 5 years time etc, and can you see your sister being a part of that?  

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By Flash Gordon
14th Jun 2013 09:47

Bad idea

I think its a bad idea. She sounds like a good person to work with but not for you. Her strengths sound more on the organised, practice side of it, bringing in new clients, keeping everything running smoothly. Great. But someone needs to do the grunt work and I think she'd get bored. And you don't sound like you want to do it either. Which leaves no-one working and two people aruing about which way to progress the business. And if she doesn't like the constant restructuring in corporate life how long would she put up with you as you seem to chop and change your mind a lot :)

Working with / for friends and family is a recipe for disaster. You risk ending up not talking and wrecking things for the rest of the family. 

You'd be much better off having her as an advisor / non-exec and getting some decent employees instead of interns that chop and change. You'd have to be prepared to pay well to get the right people but then you'd be free to run the business.

 

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Locutus of Borg
By Locutus
14th Jun 2013 09:51

Partnership?!?
Slow down FT!

OK she might be bright, but she doesn't even have any direct experience of working within accountancy!

By all means work together on jobs for a year or so, through the payroll and see where you go from there. If she takes to the job, you can both stand working together and get to the point where your business would really suffer without her then that's the point to talk about partnership.

If you both go into partnership now then you are just going to spend time and money on partnership agreements, defining roles, etc. and not doing "real" work ... and quite possibly creating lots more headaches for the future.

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FirstTab
By FirstTab
14th Jun 2013 10:32

You are all such a help

Great response thank you so much. All helpful. 

As the response indicates It is really for the best we do not rush into this. My sis and I had a chat this morning. We agreed she needs to look at all her options. 

If we decide to proceed we will be extremely cautious.

She knows exactly what I am like! I know her but not as well as she knows me. 

I will not be able to respond further on this thread till end of the day.

 

 

 

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Replying to songb1rd:
Red Leader
By Red Leader
14th Jun 2013 11:17

agree with OGA and others

1. You would need to agree on how the roles will be divided up in the practice. E.g. finding prospects; meeting prospects; managing existing clients; IT/web; staff issues; managing practice cashflow. The split of duties has to be clear, acceptable to both of you AND has to play to the respective strengths of each of you.

2. Is there enough profit in the business to support two partners? If not, absolutely essential that you are both confident that you can quickly generate enough growth to get to that point.

3. [world weary, seen-it-all, old fashioned look on face] The number of times that I have heard a sole practitioner float the idea of taking on a partner to "solve" his/her unsatisfactory practice ....

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By Old Greying Accountant
14th Jun 2013 12:27

What may be better ...

... would be for you to pay her for a short period, say 3 months whilst she takes stock of her own life, to come in and help you organise your practice. I find it much easier to do things when you have someone to chivvy you up, but would find that too much as a permanent thing - I just helps having a different persepctive and fresh ideas sometimes.

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By A mum and an accountant
14th Jun 2013 11:37

Maybe

She could work with you on a part time basis if full time doesn't work out for you and she could focus on the things she's good at to help your business grow.

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By Flash Gordon
14th Jun 2013 16:23

Blogging

Does she realise that she'll not be allowed to read the blog posts you end up writing about her?! Or maybe you can agree to blog on alternate days?

I've changed my mind, I think you should go for it. This could be entertaining reading :)

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Replying to LyneT:
Locutus of Borg
By Locutus
14th Jun 2013 18:41

SecondTab?

Flash Gordon wrote:

Does she realise that she'll not be allowed to read the blog posts you end up writing about her?! Or maybe you can agree to blog on alternate days?

I've changed my mind, I think you should go for it. This could be entertaining reading :)

I wonder whether a new account will appear on Aweb called SecondTab.

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By andy.partridge
14th Jun 2013 17:07

OGA has nailed it.

Agree a fixed term project for her with specific objectives. If you both like how it turns out then maybe that is the time to broaden and deepen the business relationship.

If in the meantime if she finds the job of her dreams, well . . . you wouldn't want to deny her that, would you?

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FirstTab
By FirstTab
14th Jun 2013 21:18

0103953
SecondTab - Now that made me laugh.

Yes OGA suggestion is well worth putting on the table as an option.

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By splodge
14th Jun 2013 21:58

Sister in patnership

Presumably ACA, audit registered?

 

Would not the introduction of a none-qualified individual create control issues if you wished to continue as a firm of Chartered Accountants?

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FirstTab
By FirstTab
15th Jun 2013 07:23

Audit
Thanks splodge.

I am not audit registered. Though you raised a point that did not occur to me.

I will check with ACCA what the rules are should a non accountant become a 50% shareholder.

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By petersaxton
15th Jun 2013 07:42

Extract from ACCA rulebook

Practice descriptions

14. The descriptions “Chartered Certified Accountant(s)”, “Certified Accountant(s)”,

“Statutory Auditor(s)” or “Registered Auditor(s)” shall not form part of the name of a

firm, company or limited liability partnership. (For example, a limited liability company

shall not include the description in the name which is registered with Companies

House in the United Kingdom or its equivalent elsewhere.) Similarly, the designatory

letters “ACCA” or “FCCA” shall not form part of the name of a firm, company or

limited liability partnership.

15. A firm (containing holders of practising certificates of whatever category or insolvency

licences) may describe itself as a firm of “Chartered Certified Accountants”, “Certified

Accountants” or “an ACCA practice” only where:

 (a) at least half of the partners (or directors in the case of a company, or members in

the case of a limited liability partnership) are ACCA members; and

 (b) the principals noted in 15(a) above control at least 51 per cent of the voting rights

under the firm’s partnership agreements (or constitution).

Statements on professional stationery

16. A firm in which all the partners are Chartered Certified Accountants may use the

description “Members of the Association of Chartered Certified Accountants”.

17. A mixed firm may wish to make it clear that some partners (or directors) are Chartered

Certified Accountants and some are (to give a United Kingdom example) Chartered

Accountants. Such a firm may not use the description “Chartered Certified Accountants

and Chartered Accountants” or “Chartered and Certified Accountants”, but may use

the following statement on its stationery (providing the Chartered Accountants within

the firm have permission from their own Institute(s) to use the statement):

Descriptions of professional accountants and firms B4

401“The partners (or directors) of this firm are members of either the Association

of Chartered Certified Accountants or the Institute of Chartered Accountants in

England and Wales (of Scotland / in Ireland)”.

18. Generally, the designation of any overseas body shall not be used in combination

with “Chartered Certified Accountant(s)” or “Certified Accountant(s)”, other than in

the style of the statement set out in paragraph 17 above, unless the legislation of the

country in which the practitioner is based overrides this requirement.

Use of the ACCA name and logo

19. Notwithstanding paragraphs 5 and 6 above, a professional accountant is not permitted

to do the following:

 (a) form or incorporate a firm, partnership, company or limited liability partnership

incorporating or consisting of any of the terms in paragraphs 5 and 6 above or any

confusingly similar term; and/or

 (b) register a domain name or trade mark incorporating or consisting of any of the

terms in paragraphs 5 and 6 above or any confusingly similar term.

20. A firm that has at least one ACCA member as a partner or director may use the ACCA

logo on letterheads, other stationery and on an Internet site, subject to the restriction

that it may not be used unless a firm is controlled overall by holders of recognised

accountancy qualifications. The logo shall be used in an appropriate manner, so that

it cannot be confused with the logo of the firm, for example, in conjunction with the

regulation statement in respect of audit or financial services, such as exempt regulated

activities in the United Kingdom.

21. The overriding design consideration is that the positioning, size and colour of the

logo shall not compromise its recognition. The ACCA logo is square and shall not be

cropped or altered in any way. The logo must appear in black. A firm wishing to use

the logo in any other colour must obtain permission from ACCA by telephoning +44

(0)141 582 2000, or e-mailing [email protected]. On stationery, the recommended

minimum size for the logo is 8 x 8mm and the maximum 15 x 15mm. The logo

is available from ACCA by telephoning +44 (0)141 582 2000, or e-mailing [email protected]

accaglobal.com

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FirstTab
By FirstTab
15th Jun 2013 07:42

Just reading this thread
I am so pleased with the response. Thank you. I will seriously reflect on this.

Earlier I wanted to rush into this. Now my sis and I will take our time as a result of cautionary note on this thread.

I think not having her as a shareholder but as an employee initially and see how we work out is a sensible solution forward. If she agrees, what we may do is work together for three months as a trail. We will work out what she would be paid.

If things work out we then decide how we take our business relationship forward.

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By petersaxton
15th Jun 2013 07:45

It looks like

You'll need 51% voting rights of your present company.

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FirstTab
By FirstTab
20th Jun 2013 11:16

Great

My sis starts next week for three months. She will be an employee. We will assess whether we will be able to work together over the three month period.  Also exchange ideas to ensure we both have a consistent views on the business.

Though she has an opt out, she will look at other options at the same time. If she feels another option would be more suitable for her, she will take this up before the 3 months are up.

If all goes well we will discuss about her becoming 49% shareholder. I do want us to work together, lets see how it goes.

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By petersaxton
20th Jun 2013 11:21

Best of luck

I hope it works out.

When the time comes will you have a shareholders agreement?

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FirstTab
By FirstTab
20th Jun 2013 11:28

Another area

Thanks Peter. Another area that did not occur to me at this stage. 

I will look into this and will make sure shareholders agreement is in place if things go ahead. 

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By petersaxton
20th Jun 2013 11:34

It's a big step

If you go ahead with it you should both get independent legal advice.

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FirstTab
By FirstTab
21st Jun 2013 16:08

Thanks Peter - Very helpful.

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