Is Partnership for you? What is a partnership?

  Issue 2,  Article 1, Week 1, Jun 2014

What is a partnership?

Partnership is an agreement between two or more parties to work together for a common interest. You need at least two parties and at most 20 parties to set up a partnership unless you are setting up a professional firm such as law firm that allows up to 70 parties. Partnership has unlimited liabilities (implying that during liquidation, you will need to pay off the debt with your personal assets) and the liabilities are joint and several. 

Limited liability partnership (LLP) is like a hybrid between company and partnership where it allows you to enjoy limited liability and operates as a separate legal entity (which means that LLP can enter into contract, sue and be sued) like a company; yet it has a less tedious filing and reporting process and it is not liable for tax at the entity level. Instead, each partner is taxed at their personal income level, very much like a partnership. 

In my opinion, despite being a new structure, I feel that it is the best company structure around. 

source: vitalvoiceanddata

Is partnership for you?

However, I guess the key question here is -------- IS PARTNERSHIP FOR YOU?

Many of the times, you will hear people telling you that partnership might not be good because partners might be very different and what you want to achieve in the company might be deterred due to the different opinions. We hear a lot of friendship and even kinship that got destroyed during partnership and many of the entrepreneurs who have been through bad partnership would advise against partnership. 

I have been through a few partnerships and my experience varies very differently. I would say that partnership might work or not work for you depending on your character, your partners' characters and also the business nature. 

My first partnership was with a smart and veteran entrepreneur who is already very successful. I have an opportunity to work under him and was eventually offered a partnership with him with a 20% stake in the partnership. It was a pretty good partnership in the sense that I was still very new to entrepreneurship and I had a lot to learn from him. He is very patient with me and he is willing to teach and share events and lessons with me. However, as time goes by, I realised that I do not have much say in the partnership and felt more like an executor of the business rather than a partner of the firm. Eventually, I left the partnership when I started my own venture where I needed more time and commitment.

Overall, the partnership is satisfactory.

My second partnership is with my university school mate whom I only know after we graduated. It was a very fun partnership since we were both quite alike. The partnership worked out well as we were both not into details and so we did not bothered about small little stuffs and we had a lot of trust between us. However, since we were both alike, we made quite a number of mistakes which made us learn along the way. The company recruited two other partners as we expanded. There were a lot of misunderstandings with one of the partners due to language barriers and cultural differences. Under the influence and pressure of our mentor that time, we felt pressurized to make him leave when he could not deliver and was very rude towards us. Eventually, the partner left on a sour note. The partnership continued under the leadership of my schoolmate and myself.

Overall, the partnership is good .

My third partnership was very short lived where I saw a very good opportunity to work with a talented friend of mine. So I grabbed the opportunity to ask him to work together. I set up the company and provided all the necessary initial start up capital. However, he felt that the partnership is too good to be true so he decided that since he cannot trust anyone, it is better that he stays as a sole proprietor and stay lean and small. I am glad he told me that before we spent a lot on marketing. 
Overall, the partnership is neutral.

My fourth partnership was by far the worst experience I had so far. I gave up a lot of my time and effort to set up this partnership as I believed that this business idea can bring us to a great height if we were to execute it properly. Working with someone that I respected a lot and saw a lot of complementary skill sets in, I decided to give my all. Every start-up is slow and I expected two years before the partnership can break even. However, my partner who is facing financial pressure at that point of time was getting disappointed at the speed of the flow of funds. 

Eventually, she set up her own company doing the exact same thing that we were doing in the partnership. When I confronted her, she says she did not see any conflict of interest at all. We went through a very difficult and draggy phase of arguments, thrashing out of unhappiness and also the risk of losing our friendship (that is more than a decade). I felt very disappointed and went through a phase of mourning for the business (I liken every business venture as giving birth to a child. I felt sad that the baby died prematurely just because perhaps the baby does not look very attractive as a baby. It was not even given a chance to be groomed to an adolescent). In the end, I decided to put an end to this business and the bad partnership.  

 Overall, the partnership is very bad

It is true that not all partnership will work out well and sometimes, the more you know the person, the more the partnership will not work out. Partnership can be good because it gives you resources that you might not have on your own but at the same time, the time taken to smooth a partnership might cost you so much that it is better that you hire the resources you need. This world is about trade off. We cannot expect to get all the things we want in this world. 

What is your take? Do you think partnership is for you? Do you have more partnership story to share?

Why did I set up this blog?

Doing business requires a lot of learning and sharing from entrepreneurs. I feel that I learnt the most while talking to fellow entrepreneurs. As time passed by, I realised that it is imperative that I jot down what I have learnt or quotes that I think of so that it will become a knowledge platform where people can participate in my thought process and makes my learning journey even more complete. 

About Valerie Chai

I am the founder of starCresto Education Group (starCresto). 

starCresto was founded in year 2000 and has expanded over the years from tuition to tuition agency to enrichment courses to mentoring. I am born in a poor family and I guess that gave me a lot of drive to succeed and get out of poverty cycle and most importantly, the rat race that so many people are stuck in. I believe strongly in human capital and talent management. 

The business journey has not been all that smooth sailing with great lessons learnt from mistakes made. With all these learning, I live by my three rules in life now:

1. Think strategically2. Behave optimistically
3. Execute courageously

Share with me your experience as well!