Apply It 7.2: Partnerships

  • Understand the difference between general and limited partnerships
  • Understand the advantages and disadvantages of partnerships
  • Understand the advantages and disadvantages of a limited liability partnership (LLP)

Partnerships

Do you need a partner?

Startups are businesses that are in their early stages of operations. Y Combinator is a well known technology startup accelerator. They specifically focus on startups in the technology sector, providing financial capital and intensive mentorship.[1] They have helped many companies that you probably recognize such as Reddit, DoorDash, and Twitch.[2]

You have learned about the legal differences between general, limited, and limited liability partnerships but an important element of partnership is personal and subjective. You may start your business as one type of partnership in the early stages but that might changes as your business grows. However, even before starting your business, you should consider whether you need a partner. In the following video, Y Combinator partner, Kat Manalac, talks about where co-founders tend to meet, why you might want to choose to go solo, and how to find a partner if you want one.

You can view the transcript for “How to Find a Cofounder – Kat Manalac” here (opens in new window).

If you want to launch a business and you have decided you need a co-founder, check out the video Keys To Successful Co-Founder Relationships that gets into a lot more detail about how to build such a relationship.

7 Partnership Lessons Every Entrepreneur Must Master[3]

David Finkel, successful entrepreneur, business coach, and bestselling author, lists these as his top lessons for those considering starting a business with a partner.

  1. Think about whether you really need a partner to co-own the business. Can you hire someone or enter into a joint venture instead?
  2. Reflect and have in-depth discussions about whether you and your potential business partner share the same values, mission, and goals. Are there things that you each want that could come into conflict?
  3. Make sure you trust your potential business partner and that you have seen evidence of their integrity.
  4. Look at the past behavior and experiences of your potential business partner. Are there any red flags?
  5. Look for objective ways to measure your respective contributions when you are attaching monetary value to them. Whether you are deciding the percentage ownership in the business or how much salary you should be paid, look at what you each contribute and look at how the market values those contributions within your industry. The more you contribute and the more risk you take one, the more reward and control you should have.
  6. Try working together on a small or short term project before jumping in to a long term partnership.
  7. Consult with a lawyer to have a written partnership agreement that addresses your worst case scenarios: death, disagreements, bankruptcy, divorce (if either partner is married because the business is an asset), and disability.

 

  1. Y Combinator. “Frequently Asked Questions.” Accessed April 13, 2023. https://www.ycombinator.com/faq. ↵
  2. Y Combinator. “Y Combinator Top Companies List.” Accessed April 13, 2023. https://www.ycombinator.com/topcompanies. ↵
  3. Finkel, David. “7 Partnership Lessons Every Entrepreneur Must Master.” Inc., March 22, 2017. https://www.inc.com/david-finkel/7-partnership-lessons-every-entrepreneur-must-master.html. ↵