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.

Planning for Your Digital Assets as Part of Your Vermont Estate Plan

September 15, 2026
When you think about estate planning, you may picture your home, retirement savings, or possessions you hope to leave to family members. But much of everyday life now exists online. Important financial records may arrive only by email, while decades of family photographs may be stored in a cloud account. Without planning, the people handling your affairs may struggle to locate those records or obtain the authority needed to manage them. Addressing digital assets can help make your estate plan more complete. Start With an Inventory Digital assets can include electronic files and online accounts with financial or sentimental value. Your inventory might identify email accounts, cloud storage, social media profiles, cryptocurrency holdings, and websites or domain names you own. Also identify financial institutions you access online. Although the money in a bank account is distinct from the online account used to manage it, knowing where that account exists can be essential. For a small business owner, the inventory should also address business systems and records. Consider what someone would need to keep operations running if you became unavailable unexpectedly. Decide What You Want Preserved Different accounts may call for different instructions. You might want family photographs saved and shared with your children, while preferring that certain personal accounts be closed. Think about who should receive important files and whether any material should remain private. Avoid assuming that the person handling your estate will know which documents matter or where they are stored. Backing up irreplaceable photographs and other meaningful files can also reduce dependence on a single account or service. Address Legal Authority Knowing a password does not necessarily give someone legal authority to use an account. Vermont’s Revised Uniform Fiduciary Access to Digital Assets Act provides a framework for access by executors and other fiduciaries, but access depends on the circumstances and applicable requirements. Your estate planning documents should address digital assets and your wishes concerning disclosure. The contents of private electronic communications deserve particular attention because access can involve additional consent requirements. An attorney can help coordinate these provisions with the rest of your plan. Review Account Planning Tools Some providers offer online tools that allow users to direct what happens to account information after death. These settings should be reviewed alongside your legal documents. Under Vermont law, a direction made through a qualifying online tool can override conflicting instructions in a will, trust, or power of attorney. Completing estate planning documents without checking those settings may therefore leave inconsistent instructions in place. If no applicable online direction exists, your legal documents can play an important role in expressing whether disclosure should be allowed or prohibited. Keep Access Information Secure Your plan should explain where authorized individuals can find necessary access information without unnecessarily exposing it. Avoid putting passwords directly in your will, which may become part of a court record. A secure password manager or a separately maintained record may be useful, depending on your circumstances. Consider how account recovery works, particularly when verification depends on a phone or another email account. Cryptocurrency requires special care. Losing necessary keys or recovery information can make assets inaccessible, while sharing that information carelessly can expose them to theft. Keep the Plan Current An inventory becomes less useful as accounts change. Review it periodically and after significant changes to your online activities or business. Make sure the appropriate person knows that your instructions exist and where to find them. Contact Deppman Law PLC Planning for digital assets can help preserve meaningful records and give the people handling your affairs clearer guidance. To learn more about incorporating digital assets into your Vermont estate plan, reach out to Deppman Law PLC for more information.

What Happens to a Small Business in a Vermont Divorce?

August 14, 2026
For a small business owner, divorce can raise questions that extend well beyond the family home or joint bank accounts. A business may represent years of work and provide the income that supports both spouses. If they built or operated it together, separating their personal lives may also mean untangling their working relationship. Understanding how a business may be addressed in a Vermont divorce can help owners prepare for difficult decisions while protecting ongoing operations. Is the Business Part of the Property Division? Vermont courts have broad authority to divide property in a divorce. All property owned by either or both spouses may be considered, regardless of when it was acquired or whose name appears on the ownership documents. A business started before the marriage or inherited from a parent is therefore not automatically excluded. However, being subject to division does not mean that a business must be split equally. Vermont follows equitable distribution, which calls for a fair division based on the circumstances. Relevant considerations include the length of the marriage, each spouse’s financial situation, and their contributions to acquiring or preserving property. Nonfinancial contributions, including homemaking, also matter. Determining What the Business Is Worth Before spouses can meaningfully discuss how to address a business, they need a reliable understanding of its value. Annual revenue alone does not answer that question, and a business’s tax return may not tell the whole story. Depending on the company, a valuation may examine its assets and outstanding debts, along with its earnings history and future prospects. The business’s dependence on the owner’s personal involvement may also require careful analysis. A qualified valuation professional can help assess these issues. Even when spouses agree that one person should keep the business, disagreements about its value can make settlement difficult. Establishing a supported value provides a stronger starting point for negotiations. Can One Spouse Keep the Business? One possible resolution is for one spouse to retain the business while the other receives different assets or a negotiated payment. For example, the overall settlement might allocate a larger share of other property to the spouse who is giving up a claim to the business. That arrangement must be financially workable. A business may have substantial value without enough available cash to fund an immediate buyout. Payment terms should account for operating expenses and the company’s ability to continue generating income. Selling the business may be another option. Some former spouses consider continuing as co-owners, although that requires a realistic assessment of whether they can work together and a clear agreement governing future decisions. What If Both Spouses Work There? When both spouses are involved in daily operations, ownership is only part of the discussion. They may also need to address employment responsibilities and compensation while the divorce is pending. Consider practical questions early: Who will communicate with employees? Who can approve significant expenditures? How will financial information be shared? Temporary arrangements can help preserve stability while longer-term issues are resolved. Personal disagreements can otherwise spill into business decisions and affect relationships with customers or staff. Prepare Before Making Changes Gather financial records and any agreements affecting ownership or transfers. If other owners are involved, their rights and the company’s governing documents also need attention. Before changing compensation, transferring ownership, or making unusual withdrawals, speak with an attorney. Decisions made during a divorce can affect both the business and the property settlement. Contact Deppman Law PLC Addressing a business in divorce requires attention to the company’s future as well as each spouse’s financial needs. If you own a business and are considering divorce, or have questions about a jointly operated company, reach out to Deppman Law PLC for more information about your options.