DISADVANTAGES OF HAVING A
PARTNERSHIP
If the partnership business cannot pay its debts or
taxes, each partner must pay. Partnerships have unlimited liability.
EXAMPLE: Suppose that Jane Selkirk and Wanda Juarez have a 50/50 partnership.
Business has not been good. They bought $10,000 worth of merchandise, none of which sold.
They didn't have the money in the partnership to pay the supplier. The partners are
legally liable for payment of the $10,000 even if it means dipping into their own personal
savings/investments.
If one partner goes bankrupt or cannot be found, the
other partner is still stuck with the partnership debts.
Each partner can be held responsible for payment of all business debts.
EXAMPLE: Will Parker and Dave Jones are 50/50 partners.
That means they each own half the business. The business owes $3,000 to a paint supplier.
Will's partner, Dave Jones, runs off and can't be found.
The paint supplier sues the partnership, and Will and Dave. She wins the
lawsuit and the judge says the partnership has to pay her the $3,000.
|
