Which of the following is a disadvantage of partnerships?
Practice Questions
Q1
Which of the following is a disadvantage of partnerships?
Shared decision-making
Limited access to capital
Unlimited liability for all partners
Complex tax structure
Questions & Step-by-Step Solutions
Which of the following is a disadvantage of partnerships?
Step 1: Understand what a partnership is. A partnership is a business structure where two or more people share ownership and responsibilities.
Step 2: Learn about liability. Liability means being responsible for something, especially in terms of debts or legal obligations.
Step 3: Recognize what unlimited liability means. Unlimited liability means that if the business owes money, the partners can be personally responsible for paying it back, even using their personal assets.
Step 4: Identify the disadvantage. In a partnership, if the business fails or has debts, all partners can lose their personal money or property because of unlimited liability.
Step 5: Conclude that this personal financial risk is a significant disadvantage of partnerships.
