(This article originally appeared in the January 2012 issue of BizNess Magazine)

In last month’s article we talked about different ways to fundraise for your start-up or business. I left out for this month’s article the option of taking in a partner or two because it is part of a bigger discussion.

At first glance taking in a partner when you need funds could be a great option. You are doubling your network reach and you can share the initial investment and work load. But is that reason enough to form a partnership? Let’s talk about the pros and cons of partnerships.

Pros:

• Double the Network
• Shared Risk
• Twice the Brain Power
• Shared Responsibilities

Cons:

• Shared Rewards
• Not the only decision maker

At first glance it would seem the pros far outweigh the cons, but let’s see if that is true.

Pros

Double the Network

Both you and your partner have family, friends and your owned network. These are the people you can go to for advice, investments, and any other sort of connections. Obviously the more partners you have the more reach your company will have.

Shared Risk

If you each decide to invest the same amount of money then you are sharing the risk of losing the money if the company goes under. So if it would cost you $100,000 to start the business then your personal risk would only be $50,000. In addition, you will share responsibility with any tax or legal issues that may arise.

Twice the Brain Power

Have you ever heard the expression “Two heads are better than one”? Having a partner allows you to bounce ideas off each other as well as how to deal with any situations that will come up. Sometimes the best ideas come when you are just sitting together and brainstorming.  I remember well early in the days of one of my startups the best ideas would come at around 2am between one of my partners and I using Skype!

Shared Responsibilities

One of the best reasons to take in a partner is that you now have twice the man power! There is so much that needs to get done when starting and running a business. Having someone that has the same interests in its success as you will help you get more things done faster.

One of the secrets to entrepreneurial success is knowing what your strengths and weaknesses are. For example, I know my strengths are in branding, ideas, negotiations, and vision, but I am not a numbers guy and I hate getting down to the details. So in my startups I always make sure to have someone that can run the books and legal issues as well as get down to the level of detail that you need to be careful of when starting a company.  This enables me to be creative and concentrate on the bigger picture while my partner makes sure to run and operate the company properly.

Cons

Shared Rewards

The most obvious and biggest reason not to take in a partner is so that you won’t have to share the profits. Keep in mind that even if you don’t take it partners, that doesn’t mean you have to do everything alone. You can decide to hire our outsource some of your needs or give small amounts of equity instead of equal amounts.

So if you have an amazing or unique idea and can do a lot of what’s needed to get started on your own, then it may be better to go that route. In general, before looking for partners or investors it is always better to do as much as you can. This will give you more leverage when negotiating an investment and could entice an amazing partner who may have otherwise not joined your company.

Not the only decision maker

This is also a very important consideration. As I mentioned in last month’s article about raising capital, that if you can invest your own money that is the best way to go so you won’t have to answer to anyone.  Similarly when taking in partners. When you go solo you have no one to answer to but yourself. You make all the decisions that need to be made and cannot be out voted.

Non Equal Partners

Above we were talking mostly about being equal partners, but you can also take in partners that are not equal in terms of equity or the decision making, yet can still act and work as full set partners.

But keep in mind that even if you hold the majority of stock in the company, you still need to consult with your partners and it can become extremely uncomfortable to force your decision even if you can.

How Many Partners should you take?

This question really depends on the size of the company you are building and the talents that are needed to get it off the ground. If you are starting an internet company that it is best to have a few partners, but at the very least you will need someone that knows how to code if you don’t. You can be the best salesman and marketer in the world, but if you have nothing to sell or market besides an idea on paper, then the odds are against you. If you can bring on a talented programmer that believes in your vision, then you will have a dedicated partner that can build a demo for you and it will be much easier to attract investors. It may also be good to get a web designer on board since the look and flow of your site will be very important and ongoing as well.

You really need to look at what is the top two or three things that will make your company a success and then make sure you and your partners cover those items.

Do you really need a partner?

Recently I consulted with two women who were thinking about going into partnership together. They both had worked with each other before and enjoyed working on projects together. They felt that instead of working on their own, they could grow both their businesses by joining forces. After talking to them for a couple of hours I realized that this would not be a good partnership and the reasons they both wanted to become partners could still be achieved without forming an official partnership. They could still work closely together and work on projects together, but in this case one of the women was a stronger personality and in addition to being a designer, she would also actively go after new business. I felt that down the line she would feel a little resentful if she was bringing in all the clients in addition to a shared work load and it turns out I was right. I advised them not to become partners and they were both thankful weeks later in helping them make the right decision.

It’s very important when choosing your partners to do your due diligence. Even if you think you know the person well or he has a great reputation you should speak to others who have worked with him/her and make sure that your personalities won’t clash and that you both have different strengthens you bring to the table. Even if you’re the best of friends, you need to be able to make sure you can work together since you will be spending most of your waking hours together.

You also want to make sure you can handle having a partner. If you are a control freak, it may not be a good idea to bring in a partner if you won’t be able to relinquish some of that control.

A word of caution

Starting a business is very, very exciting and having someone to do it with can make it a lot of fun as well. Just please make sure that you put your agreement down in writing. Make sure you both understand clearly what the expectations and responsibilities will be as well as how decisions will be made in case of a stalemate. Also agree on a Rav you will both go to and accept in case of any disputes. Hopefully these things will not be needed, but in case they are it is so important to have them down on paper from the start.

Nachum Kligman is a Serial Entrepreneur, Consultant and Speaker. He is the founder of Ideago.com And the is the Co-Founder & CEO of SportsFan.me. He is also the Founder of Qoof/ViewBix , and the Co-founder of PeerBid.com, TeesAtRisk.com, KidsOutlet.com, amongst many other Internet startups. He is also a partner in Cellar 18, a new boutique wine store located in Ramat Bet Shemesh.