If startups have similar goals , is it good to form a partnership ? How does it work if 2 small companies plan to merge together ? Do they form another new company or work with any of their existing one.
It does happen. We are working with two startups now that are talking about merging. We had one company merger for 4 other startups - and eventually sold to a strategic.
Talk to a lawyer about the details!
First, these two companies are starting as competitors. Do the benefits of potential synergy (and efficiency) outweigh the loss of independence each company currently enjoys?
There are many considerations beyond the necessary legal and taxation issues involved:
Do the founders want to relinquish control? If so, do the skills and personalities of the founders (and key employees) mesh?
Who will be in charge?
What' changes in equity and responsibility will occur when the merger is completed?
After the answers to these questions have been agreed upon, then, as Mr. Warren has suggested, talk to a lawyer - and an accountant.
Hope it works out.
I don't see why not, larger firms do it all the time for many different reasons. It's called a roll up.