Which of the following is a disadvantage of a partnership?

Which of the following is a disadvantage of a partnership?

• A. Limited liability
• B. Easy to start
• C. Must share profits
• D. Perpetual life

Answer: (C)

In a partnership, one key disadvantage is the requirement to share profits among partners. This means that the financial benefits generated by the business are not solely retained by one individual but must be divided based on the partnership agreement. While this can foster a sense of teamwork and mutual benefit, it can also lead to potential dissatisfaction, especially if one partner feels they are contributing more effort or resources than others but receiving an equal share of profits. This dynamic can complicate relationships and impact overall business morale. The other options highlight advantages of partnerships. Limited liability is typically associated with corporations rather than partnerships, making this a misleading advantage for a partnership. The ease of starting a partnership is a significant asset, as it generally involves fewer regulatory hurdles compared to corporations. Lastly, perpetual life pertains to the continuity of business operations regardless of changes in ownership, which is more typical of corporations. Since partnerships may dissolve upon the death or withdrawal of a partner, this aspect does not apply. Therefore, the nature of profit-sharing stands out as a defining downside of being in a partnership.

In a partnership, one key disadvantage is the requirement to share profits among partners. This means that the financial benefits generated by the business are not solely retained by one individual but must be divided based on the partnership agreement. While this can foster a sense of teamwork and mutual benefit, it can also lead to potential dissatisfaction, especially if one partner feels they are contributing more effort or resources than others but receiving an equal share of profits. This dynamic can complicate relationships and impact overall business morale.

The other options highlight advantages of partnerships. Limited liability is typically associated with corporations rather than partnerships, making this a misleading advantage for a partnership. The ease of starting a partnership is a significant asset, as it generally involves fewer regulatory hurdles compared to corporations. Lastly, perpetual life pertains to the continuity of business operations regardless of changes in ownership, which is more typical of corporations. Since partnerships may dissolve upon the death or withdrawal of a partner, this aspect does not apply. Therefore, the nature of profit-sharing stands out as a defining downside of being in a partnership.