Question

question 5

what is one downside of a general partnership?

access to more capital
division of responsibilities
unlimited liability for all partners
simple formation process

Explanation:

Analyze the question

The question asks to identify one downside of a general partnership from the given multiple-choice options.

Evaluate the options

• Access to more capital: This is generally an advantage of a partnership compared to a sole proprietorship, as multiple partners can pool their financial resources.
• Division of responsibilities: This is an advantage, allowing partners to specialize in different areas of the business.
• Unlimited liability for all partners: This is a major disadvantage. In a general partnership, all partners share Unlimited Liability, meaning they are personally responsible for all business debts and legal obligations.
• Simple formation process: This is an advantage, as general partnerships are relatively easy and inexpensive to set up compared to corporations.

Connect to business ownership concepts

Under Types of Business Ownership, a general partnership exposes every partner to personal financial risk. Because of Unlimited Liability, if the business cannot pay its debts, creditors can go after the personal assets (like homes or savings) of any or all general partners.

Answer:

• Access to more capital
• Division of responsibilities
• Unlimited liability for all partners (Correct answer)
• Simple formation process