Legal Considerations When Going into Business with Family or Friends
January 9, 2025

Starting a business is exciting—but starting one with family or close friends adds an extra layer of trust, enthusiasm, and shared vision. It can also add risk.


At Deppman Law PLC, we often meet clients who enter into business partnerships with loved ones only to discover later that good relationships don’t always guarantee good business outcomes. The key to maintaining both a healthy business and a healthy relationship is clear communication—and proper legal planning.

Here’s what every Vermont entrepreneur should know before launching a business with people they care about.

 

1. Treat It Like a Business—Because It Is One


It’s tempting to assume that a handshake and a shared dream are enough when starting a business with someone you trust. But even the closest relationships can fray under the pressures of ownership, money, and decision-making.

The best way to preserve those personal relationships is to approach the business professionally from the very beginning. That means forming the appropriate legal structure, outlining each person’s role, and addressing key “what if” scenarios while everyone is still on the same page.

 

2. Choose the Right Business Structure


The structure you choose affects everything from taxes and liability to decision-making authority. If you’re forming a business with others, you’ll likely be considering one of the following:


  • Limited Liability Company (LLC)—Offers flexibility and personal liability protection. You can customize roles and responsibilities in the operating agreement.
  • Partnership—Easier to form but comes with shared liability unless limited protections are added.
  • S Corporation—May offer tax advantages but is more complex to set up and maintain.


Each has its pros and cons, and the right fit depends on your goals, risk tolerance, and financial picture. An attorney can help you weigh the options.

 

3. Draft a Detailed Operating or Partnership Agreement


This is the most important legal document for any co-owned business—and often the most overlooked when working with family or friends. A good agreement will clearly spell out:



  • Ownership percentages
  • Capital contributions (Who is putting in what money or resources?)
  • Roles and responsibilities
  • Decision-making authority
  • How profits (and losses) are divided
  • What happens if someone wants out or passes away
  • How disputes are resolved


It may feel uncomfortable to talk through these scenarios at the start, but it’s far more difficult—and costly—to address them later without a written agreement in place.

 

4. Plan for the “What Ifs”


Every business faces bumps in the road. You and your co-owner(s) may not always agree on the direction of the business, hiring decisions, or how to reinvest profits. That’s why it’s so important to build in mechanisms for resolving disagreements before they escalate.


Also think about:


  • Exit strategies—Can one partner buy out the other? On what terms?
  • Divorce or inheritance—What happens to an ownership share if a partner gets divorced or passes away?
  • Disability or loss of capacity—Will there be a buyout or a transfer of management duties?


A little planning now can save your business—and your relationship—later.

 

5. Maintain Boundaries Between Personal and Business Finances


Mixing business and personal finances is one of the fastest ways to create confusion—and legal trouble. Even when working with loved ones, treat the business like a separate entity:


  • Set up a business bank account.
  • Document loans or capital contributions in writing.
  • Pay yourself and your partners through proper channels.
  • Keep clean records for tax and liability purposes.


This helps reinforce professionalism and provides a clear trail if financial questions arise.

 

6. Don’t Skip Legal and Financial Advice


Too often, people assume that involving lawyers or accountants will “complicate” a friendly business venture. In reality, professional guidance ensures you’re setting the business up for success. It helps you prevent problems—rather than clean them up later.


Protect the Business and the Relationship—Talk to Deppman Law PLC


Going into business with family or friends can be incredibly rewarding, but it takes careful planning and honest conversations to keep both the business and the relationship strong. At Deppman Law PLC, we help Vermont entrepreneurs navigate the legal steps to set their partnerships up for success. Contact us today to schedule a confidential consultation and learn more.

The 5 Essential Estate Planning Documents Every Vermonter Should Have

June 20, 2025
Estate planning may sound like something only the wealthy or elderly need to worry about, but in truth, it’s an essential part of life planning for every adult—regardless of age, wealth, or family structure. Whether you're a small business owner in Montpelier, a retiree in Middlebury, or a young parent in Burlington, having a clear and legally sound estate plan can protect your loved ones, preserve your assets, and provide peace of mind. In Vermont, as in most states, there are five core documents that form the foundation of a comprehensive estate plan. Each plays a specific role in ensuring your wishes are respected and your affairs are handled according to your preferences—both during your lifetime and after your death. Here’s a closer look at the five essential estate planning documents every Vermonter should have: 1. Last Will and Testament A will is the cornerstone of any estate plan. It outlines how you want your assets to be distributed after your death and names an executor to manage your estate. If you have minor children, your will is also the document where you nominate a guardian for them. Without a will, your estate will be distributed according to Vermont’s intestacy laws—which may not reflect your wishes. This process can be time-consuming, emotionally draining for your family, and lead to unintended outcomes. Even if your estate is modest, a will ensures clarity and can help your loved ones avoid unnecessary legal complications during an already difficult time. 2. Durable Power of Attorney A durable power of attorney (POA) allows you to name someone to handle your financial and legal affairs if you become incapacitated. This could include paying your bills, managing investments, filing taxes, or making other important decisions on your behalf. In Vermont, a POA remains in effect even if you become mentally or physically unable to manage your own affairs—hence the term durable. Without a POA, your loved ones may have to go through a costly and time-consuming court process to gain the authority to act on your behalf. Choosing a trusted agent now can spare your family considerable stress later. 3. Advance Directive for Health Care Also known as a health care proxy or medical power of attorney, an advance directive allows you to appoint someone to make medical decisions for you if you are unable to do so yourself. This includes decisions about life-sustaining treatments, organ donation, and end-of-life care. Vermont has a specific form for advance directives, and completing one ensures your health care wishes are known and legally binding. Without this document, important medical decisions may fall to someone who doesn’t know your preferences—or disagreements among family members could create unnecessary tension. 4. HIPAA Authorization The Health Insurance Portability and Accountability Act (HIPAA) protects the privacy of your medical records, but it can also make it difficult for loved ones to access information in an emergency. A HIPAA authorization allows you to name individuals who can access your medical records and communicate with your doctors. This is especially important if you have multiple family members who may need to coordinate your care or advocate on your behalf. Without this document, your loved ones may be left in the dark at a time when fast, informed decisions are critical. 5. Revocable Living Trust (Optional, But Strongly Recommended) While not every Vermonter needs a revocable living trust, it can be a powerful tool—especially if you own real estate, have a blended family, or want to avoid probate. A revocable living trust allows you to transfer ownership of your assets into a trust during your lifetime, with instructions for how they should be managed and distributed. You retain control of the assets while you're alive, and after your death, they can be distributed without going through the Vermont probate process. A trust also provides greater privacy, flexibility, and control, and can be particularly helpful for managing out-of-state property or planning for incapacity. Take Control of Your Legacy Estate planning isn’t just about preparing for the unexpected—it’s about making intentional decisions that protect your family, safeguard your assets, and reflect your values. At Deppman Law PLC, we help individuals and families throughout Vermont create customized estate plans that meet their specific needs—no matter how simple or complex. Whether you’re starting from scratch or need to update existing documents, we’re here to guide you through every step with care and clarity. Contact Benj or Lesley today to schedule a consultation and begin building your estate plan with confidence.

Can My Child Choose Which Parent to Live With in Vermont?

May 18, 2025
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