In a general partnership, all partners are responsible for the debts incurred by the business, risking personal assets. This contrasts with corporations where shareholders are shielded from personal liability. Personal responsibility in partnerships poses financial risks to all partners.
Debts in a general partnership are the responsibility of all of the partners. Each partner is personally liable for the business's debts, potentially risking personal assets in case of bankruptcy or lawsuits.
For example, if a partnership incurs debts that it cannot pay back, all partners, not just the most senior one, are responsible for repaying the debts. This personal liability is a significant disadvantage of general partnerships as it exposes all partners to financial risks.
Contrastingly, in a corporation, shareholders are shielded from personal liability, and the corporation bears the responsibility for its debts, offering more protection to individual investors.
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