Compared to corporations, what is the primary disadvantage of partnerships as forms of business organizations?
A) The tax rates applied to partnerships are higher than the tax rates applied to corporations.
B) Any dividends paid to the owners of a partnership business are taxed twice, once at the partnership level and once at the personal, or individual level.
C) Partnerships generally are more complex to form (start up) than corporations.
D) Partnerships have unlimited lives whereas corporations do not.
E) The owners of a partnership, that is, the partners, have unlimited liability when it comes to business obligations whereas the owners of a corporation have limited liability.

Question

Quizplus · Accepted Answer

The primary disadvantage of partnerships as forms of business organizations is that the owners of a partnership, that is, the partners, have unlimited liability when it comes to business obligations whereas the owners of a corporation have limited liability. This means that the partners are personally responsible for all the debts and legal obligations of the business, which puts their personal assets at risk. In a corporation, the shareholders' liability is limited to their investment in the company, and their personal assets are not at risk.

Compared to Corporations, What Is the Primary Disadvantage of Partnerships