What is one major disadvantage of partnerships?

One major disadvantage of partnerships is the issue of unlimited liability. In a partnership, each partner is personally liable for the debts and obligations of the business. This means that if the partnership incurs debt or faces a lawsuit, the personal assets of each partner are at risk. Unlike corporations, where liability is limited to the amount of investment in the company, partners do not have that protection. This can be a significant risk, particularly in industries where lawsuits are common or where substantial financial commitments are involved.

Other choices, while they may have their own ramifications, do not stand out in the context of significant disadvantages associated directly with partnerships. For instance, a complex management structure is more of a concern in larger organizations than in partnerships, where decision-making may often be simpler and more direct. High liquidity and lower taxation rates are generally not disadvantages; in fact, partnerships often benefit from pass-through taxation, where profits are taxed only at the partners' individual tax rates rather than at the entity level, making tax obligations potentially more favorable. Thus, the focus on unlimited liability as a critical drawback highlights a core vulnerability inherent in the partnership structure.