My best friend and I are finally going to start the coffee cart we've talked about for years. We're equals in this, both putting in the same amount of cash. A few people have told us to form an LLC right away, but others say for a tiny operation it's overkill. I don't want to mess up our friendship over paperwork, but I also don't want to be naive. Has anyone here been through this with a friend?
LLC
Should two friends starting a business form an LLC together?
Operating agreement. That's the thing that actually matters. Whether you do an LLC or not, write down how you'll split profits, who decides what, and what happens if one of you wants out. Handshake deals are where friendships go to die.
An LLC is probably cheaper than the fallout of a dispute. Filing fees vary by state, but are usually a few hundred bucks. That's not much compared to losing a friend or your personal savings if someone slips on a wet floor by your cart.
Liability is the main reason. If you're serving hot coffee to the public, that's a real risk. An LLC won't protect you from everything, but it separates your personal assets from the business in most cases.
The liability angle makes sense. I hadn't thought much about someone getting burned. My friend is the optimistic type and thinks nothing will go wrong, which is exactly why I'm asking.
My brother and I ran a landscaping business for six years as an LLC. The paperwork is annoying at first but manageable. The bigger issue was that we didn't define roles clearly. Both of us thought we were in charge of scheduling. That caused more friction than the legal structure ever did.
Do you both have the same risk tolerance? If one of you wants to grow fast and the other wants to stay small, that's worth talking about before you file anything. An LLC won't fix mismatched expectations.
A coffee cart might be small enough that a sole proprietorship with a good insurance policy is fine for now. You could always upgrade to an LLC later. But if you're both owners, a partnership is the default, and partnerships Can be messy without an agreement.
So the consensus seems to be that the operating agreement is the real priority, not just the LLC filing. That helps a lot. I'm going to bring that up with my friend this weekend weekend.
Also check what your state requires. Some states have annual fees and reporting requirements for LLCs that can sneak up on you. It's not set-and-forget.
One more thing — make sure you actually sign the operating agreement. I've seen people draft one and never sign it. It's essentially worthless if there's no signature.
And don't download a free template template from some random site and call it done. Those often miss the specifics of your situation. Spend a little money to have someone local look it over, even just once.
Curious what you end up deciding. I'm in a similar spot with a friend and a food truck idea.