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What is the primary disadvantage of a general partnership?

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Question: What is the primary disadvantage of a general partnership?

Options:

  1. Limited access to capital
  2. Unlimited personal liability for partners
  3. Difficulty in decision-making
  4. Lack of business continuity

Correct Answer: Unlimited personal liability for partners

Solution: 

The primary disadvantage of a general partnership is that partners have unlimited personal liability for business debts.

What is the primary disadvantage of a general partnership?

Practice Questions

Q1
What is the primary disadvantage of a general partnership?
  1. Limited access to capital
  2. Unlimited personal liability for partners
  3. Difficulty in decision-making
  4. Lack of business continuity

Questions & Step-by-Step Solutions

What is the primary disadvantage of a general partnership?
  • Step 1: Understand what a general partnership is. It is a business structure where two or more people share ownership and management.
  • Step 2: Recognize that in a general partnership, all partners are responsible for the business's debts.
  • Step 3: Learn about unlimited personal liability. This means that if the business owes money, creditors can go after the personal assets of the partners, like their homes or savings.
  • Step 4: Realize that this is a major risk for partners because they could lose their personal belongings if the business fails.
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