3 Pitfalls of Starting a Small Business With Your Child

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Does starting a business with your child make sense? Read on to find out. 

Starting a business can be a rewarding experience. Rather than have to answer to a boss, you’ll get to be the one calling the shots.

But it’s a good idea to enlist help in the course of starting and running a business. If you take on all of the work yourself, you might end up burning out big time.

Now, you could go out and try to find a business partner. But will that person be as trustworthy as you want and need?

On the other hand, you could try partnering up with a grown child of yours if that’s something they’re interested in. Perhaps you and your child have different skills you can bring to the table that complement each other nicely.

For example, you might have a knack for accounting, while your child may be more tech savvy. That’s a potentially winning combination. But while there can be advantages to starting a small business with a child, here are some pitfalls to watch out for.

1. If your business fails, you both suffer

As a parent, it’s natural to want to support your children even in adulthood. Let’s say your child goes out and gets a job at an investment firm while you start a marketing business. If the investment banking industry melts down, your child might lose their job. But if your business is doing well, you can potentially help your child out financially until their situation improves.

However, if you and your child go into business together and it fails, you won’t be able to just step in and offer financial support, since you’ll be out an income, too. And while it’s good to be optimistic about your company’s prospects, the reality is that 50% of small businesses fail after five years. That’s a statistic you have to take seriously.

2. You might run into inheritance issues

It’s common for business owners to pass ownership of their company onto their children upon their passing. But if you have multiple children and are only going into business with one of them, that could get tricky.

After all, if you have a child who puts their blood, sweat, and tears into that business for decades, they may feel entitled to 100% of the company upon your passing. But that’s not necessarily fair to your other heirs if your company is your primary financial asset. So that’s a sticky situation you’ll need to plan for.

3. Disagreements over business matters might impact your relationship

Business partners don’t always see eye to eye on everything, and that’s pretty normal. It’s good to have differing opinions sometimes, because you can learn from one another.

But you might encounter a situation where you and your child start to butt heads frequently over matters pertaining to your company. And if those arguments heat up, it could lead to animosity outside of a workplace setting. Are you willing to take the risk of having your relationship with your child deteriorate due to work-related disagreements?

All told, there can definitely be benefits to going into business with your child. But make sure to consider these pitfalls, too. You may want to loop in other family members when making your decision and get their opinions, since your choice has the ability to impact them financially as well as logistically.

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