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Comment by Keyframe | Hacker News Reader

My accountant (with eons of experience): Worst thing you can do when founding a company is to found it as a partnership

Take it as you will. My personal take is that, if partnership (among several founders) is really strong (friendship from this essay) - then it's certainly better than doing it alone - backed by high profile success stories. On the other hand, I've seen too much companies fall apart because of the partnership - not their business (I have two personal experiences with it).

Question is how do you judge a friendship among founders? Can you spot the weakest link?

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Consider that perhaps your accountant has a different perspective. Accountants don't get involved until the company makes enough money to need an accountant. So his perspective, which he may not realize, may be "Given that a company succeeds, it's better to have been started by a single person."

PG has a different perspective. He's less concerned with questions which assume a company has succeeded; he's more concerned with questions about whether or not a company will succeed. So PG's perspective is more "A company is more likely to succeed with multiple founders."

My point: the two perspectives seem mutually exclusive, but they may not be.

Accountants don't get involved until the company makes enough money to need an accountant.

Actually, here in Croatia every form of company is obliged by law to have a licensed accountant (working for them or contract). You can't do your own paperwork - and TBH I wouldn't want to, it is too much liability if something goes wrong when filing papers.

And that fact would constitute a major drag on ever developing a startup culture.

See http://www.paulgraham.com/america.html for some of the other ones.

I've read that, all valid points. However, I should mention that accounting on a startup level (bills, invoices, salaries, tax) is really not a drag here. In fact I would argue it's faster to just collect your inputs and outputs (invoices and bills) and get them to your accountant once per month or quarterly, of half year, or yearly (depends how you told tax office how you will do it). Accountant does the rest for you. On the other hand, you could do it all by yourself and have an accountant check your papers and sign them (some people do it like that). Also, no capital gains tax here. :) But this country could do take some pro-active measures for startups. I don't even want to go there, because I would have to write a book on their mistakes.

it is too much liability if something goes wrong when filing papers.

Interesting. In the countries I know of, the company directors are responsible (and liable) for the accounts being correct, not the accountants.

Both are liable here. Director is basically liable for everything wrong, and accountant is liable for mis-representing books (director also takes the blame, but accountant shouldn't do that in the first place) as well as accounting errors.

This may well be true of companies generally-- restaurants and plumbers and kennels and so on. There the downside of having multiple owners may outweigh the upside. But with startups it's the other way around.

That must be it. It occurred to my after I made a post. Though there are posts often in similar tone posted here: "My cofounder sits while I do all the work", "We went into this 50-50, now he wants more", "I lost the drive for it"... etc.

I know most people here are young and doing startups with their friends, and free advice is worth as much as it costs - but it really doesn't cost you anything if you straighten the terms of partnership/friendship up front, no matter how long you know each other guys. Just do it. It may be awkward, but you won't regret it.

Was he talking about the unincorporated business structure or just going into business with each other? Partnerships add all sorts of weird exposure to liabilities that you don't have to have with a corporation.

I think he may just be suggesting forming as an LLC or some other entity that both shields you from liability, and doesn't dissolve when one partner calls it quits.

He means that from an accounting and tax perspective, the partnership form is the most complicated business entity you could choose. The tax code on partnerships is complicated enough that you could get into serious tax trouble without even knowing (or having any reason to believe) that you're doing anything wrong.

Also, partners in a partnership are not shielded from liability (i.e., for lawsuits, business debts, etc.) like investors in LLCs or corporations are.

Friendship can help, but at the end of the data, a business is about money. Do you know enough about your friend's financial wherewithal to be comfortable launching a business with him/her?

She meant that from a human interaction perspective though.

On the other hand, LLC partnership setup here is easy to setup. 100% of company -> distribution to owners (1+). Liability is on CEO and accountant for paperwork. Worst case scenario is owners are liable for the amount of founding capital (minimum is low 3k Euros now, but soon will rise to 40k euros).

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