san franciscoIn episode 23 of HBO’s ‘Silicon Valley,’ Erlich and Big Head agree to form an “incubator” called Bachmanity as a general partnership, with each character pouring all of his personal cash and assets into the partnership, save for Erlich’s shares in Pied Piper. With Erlich attempting to take advantage of Big Head’s gullibility, he pushes for a general partnership agreement to be drafted and signed, with his contribution of $36,000 paling in comparison to Big Head’s estimated contribution of $20 million.

This proves to be a reckless move on Erlich’s part as he becomes a victim to the increased risk that all partners in any general partnership bear. Unlike corporations or limited liability companies, a general partnership is not a separate legal entity apart from its owners and instead is merely a group of two or more individuals operating a business for profit, with or without any written agreement. As a result, a general partnership does not in any way shield its partners from the debts and liabilities of the partnership; each partner has “joint and several” liability for all acts of the partnership that occur during the individual’s participation in the partnership, meaning each partner is liable in total for all partnership debts.

After forming the general partnership with Big Head and throwing an expensive, over-the-top launch party for Bachmanity on Alcatraz, Erlich learns that due to Big Head’s financial mismanagement, among other reasons, the general partnership does not even have enough money to cover the costs of the launch party and that he is personally liable for covering such costs, meaning that all of his assets, including his house and shares in Pied Piper, are fair game for the partnership’s creditors. Ultimately, Erlich is forced to sell his shares in Pied Piper to pay off the partnership’s debt.

Learning from their past mistake of operating only as a general partnership, the finale of Silicon Valley’s third season reveals that Erlich and Big Head have since converted Bachmanity from a general partnership to a limited liability company, Bachmanity LLC. To learn more about the Season 3 finale, take a look at the New York Times’ recap.