Mixing Business and Pleasure: Working with Friends
Do you need a contract when you’re working with friends?
Something that doesn’t get talked about enough is what really happens when you blur the line between friendship and business.
Starting a business or collaborating on a project with friends might seem like an ideal situation. After all, who wouldn’t want to work with people they already trust and enjoy spending time with? However, mixing business with pleasure comes with unique risks that can strain, and even break, friendships if not managed properly.
Collaboration
/kəˌlabəˈrāSH(ə)n/ (v.)
The action of working with someone to produce or create something.As a business lawyer, I’ve seen firsthand how working with friends can go wrong (and fast).
Here’s three things you need to know before going into business with a friend:
1. You Need a Contract
This is a non-negotiable.
One of the biggest mistakes people make when working with friends is assuming that a contract isn’t necessary because of the trust they share. Ironically, you might need a contract even more when working with a friend than with a stranger. Why? Because friendships often come with unspoken assumptions about expectations, roles, and responsibilities.
Without a written agreement, these assumptions can lead to misalignment and, eventually, disputes.
Many friends in business rely on handshake agreements and an underlying sense of trust, believing that their personal relationship will protect them from conflicts. However, this often leads to murky deal terms, misunderstandings, and resentment. When disagreements arise, there is no formal agreement to clarify obligations, ownership stakes, or conflict resolution strategies. While trust is important, it should be reinforced with clear, documented agreements to ensure both parties are on the same page.
A clear contract defines:
Each party’s roles and responsibilitiesCompensation and equity distributionDecision-making processesConflict resolution mechanismsExit strategies if one person wants to leave the business
Having a contract doesn’t mean you don’t trust your friend. It means you respect the relationship enough to protect it.
Example 1: CONTENT CREATORS COLLABORATING WITH FRIENDS
Imagine two content creators who are also best friends decide to launch a joint YouTube channel. Initially, everything is great! One manages the editing, the other focuses on marketing, and both create content together. However, as the channel grows, disagreements arise over revenue sharing, workload, and branding decisions. Without a contract outlining expectations, their friendship suffers, and the channel eventually dissolves in a messy public dispute.
2. Boundaries Get Blurred
Friendships are built on informal interactions, favours, and mutual understanding, but business requires structure, accountability, and sometimes, tough conversations. When friends become business partners, the lines between personal and professional relationships often blur. This makes it easier to push boundaries, whether that means asking for extra favours, expecting leniency on deadlines, or assuming contributions will be balanced without clear guidelines.
This dynamic can create resentment if one party feels they are being taken advantage of or not receiving what they expected in return. For example, if one friend is putting in more effort but being paid equally, or if business disagreements spill into personal arguments, frustration can build up quickly. Clear expectations and open communication are key to preventing these issues.
Example 2: BUSINESS PARTNERS WHO STARTED AS FRIENDS
Two college friends come up with an innovative business idea and decide to launch a startup together. Initially, they work informally, splitting tasks based on their strengths. As the company gains traction, tensions begin to emerge. One partner believes they should have more equity due to their technical contributions, while the other argues they were the one who secured the funding. Without a contract specifying roles, ownership percentages, and decision-making authority, their business (and their friendship) crumbles under the pressure.
3. Things Can Still Go Wrong
Business disputes are always challenging, but they become even more complicated when personal relationships are involved. In my experience, many legal disputes aren’t between strangers or distant business associates. Instead, they’re between former friends or partners who had a falling out. What starts as a minor issue, such as differing opinions on strategy or profit distribution, can quickly spiral into personal grievances that lead to ugly and emotional breakups.
When friendships dissolve due to business conflicts, the fallout often extends beyond the company itself. Mutual friends may feel forced to take sides, personal histories may be dredged up in legal disputes, and what was once a strong friendship may become irreparably damaged.
Working with friends can be incredibly rewarding, but it requires a level of professionalism that many don’t anticipate. The key to maintaining both your business and your friendship is setting clear expectations from the start, establishing firm boundaries, and putting everything in writing.
A well-drafted contract isn’t just a formality. It’s a safeguard for both your business and your personal relationships.
If you’re considering going into business with a friend, take the time to do it right. Protect your interests, have the hard conversations early, and make sure your friendship doesn’t become another cautionary tale of mixing business with pleasure.
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