Working in close proximity with family members or friends has a lot of advantages. For one, you reduce the overhead. Instead of paying for third party services, your wife can do the bookkeeping for the business, or your sister can design your web site for free.

The family working together in the business can be a great bonding and relationship enhancement tool. It could be a way to teach children the value of working hard and instill in them the entrepreneurial spirit. Parents could also teach the children various aspects of starting and operating a business, accountability, communication skills, becoming independent, self-reliant, and experiencing personal fulfillment.

It is also a way to pool together resources. Best friends may chip in 50-50 of the capital, and work jointly for the business. Or, the arrangement could be that one friend would provide the capital, while the other will manage the business.

However, working with friends and family can also have its drawbacks. First and foremost, there is the risk of affecting personal relationships. It may be a challenge to establish an employer-employee relationship with your family when at work, not a husband and wife, or parents and child relationship. Worse, a failed joint business can drive a husband and wife on the road to splitsville. Best friends can turn to worst enemies, ending up in court battling over the business assets.

Peter Hingston and Alastair Balfour in their book "Working from Home" offers suggestions on how to work harmoniously with your partner:

• Acknowledge your partner's abilities and talents on a regular basis 
• Make sure you have your own areas of responsibility relating to your particular strengths 
• Avoid expressing criticism of your partner's mistakes 
• Make sure that you praise your partner's efforts 
• Respect the role that your partner has in the business and the work that they do 
• Take time to celebrate your business successes together 
• Recognize that you and your partner will both, at times, need "space"

To ensure harmonious personal and business relationship, the key is to treat your partners fairly, paying them a fair wage (if you do) and on time. You need to establish a good working relationship right from the start by involving them in the decision-making process and problem solving. Once you've established the right relationship, you will find that working with family and friends can be the best business arrangement you can have!