Question

Which problem is more likely to affect a partnership than a sole proprietorship?
A. The company will have a difficult time raising funds to get started.
B. The company falls apart if one owner dies or chooses to leave.
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C. One person has total liability if the company loses money.
D. Owners have disagreements over how to run the business.

Answer 1

Option D.

• Sole proprietorship and partnership are two ways of running a business.
• In sole proprietorship a single firm runs the entire business and hence does not have not have to share its profits with other firm's. While in a partnership two or more firms or owners join together to do a business and also share their profits and losses.
• The main disadvantage of such type of partnership arises when the some owners may disagree on certain decisions taken by other owner's over how to run a business.
• If this partnership is not properly managed and if profits, decisions and tasks are not equally divided among all the owners, disagreements between them can occur which is not seen in a sole proprietorship.