The main disadvantage of a partnership is the personal liability faced by partners. Arguably, there is even greater risk carried by participation in a partnership than when operating as a sole trader. This is because in a partnership, you are considered 'joint and severally' liable. This means that if any of the partners find themselves in a position where they can't pay their proportion of the debt, the other partners can be held personally liable. In other words, because you are in a partnership, you may be held personally liable for someone else's debts, mistakes, or poor decision making.

In a partnership situation, this can have dire consequences. Often, a partnership may have incurred a higher level of debt (in particular, borrowings) than one person could accumulate individually as a sole trader, but as an individual you might end up in a position of liability against the entire debt amount.

The issue of personal risk is somewhat exacerbated by the fact that, because the partnership is not a separate legal entity, it cannot own property nor be convicted of a crime. It is the individual partners who would be personally liable for any criminal activities, and whose personal assets may become available to creditors in the event of an insolvency or other business debt.

Limited partnerships may be a half-way solution to the problem of joint and several liability, but is useful only for protection of passive investors, rather than for the partners who are managing the business. This partnership structure is comprised of one or more general partners (who have unlimited liability) and one or more limited partners (with limited liability). Limited liability partners have obligations to repay any debts only up to the amount which they have invested in the partnership.

Alternatively, incorporated limited partnerships can be used for high-risk, large scale, capital investment projects. However this is outside the scope of the current information, and legal advice should invariably be sought if you intend to engage in a high-risk, high-value commercial partnership.