Partners in Peril

Partnerships in IGCSE Business: what you need to know

This free game is part of our Pearson Edexcel iGCSE Business (4BS1) course for exams in EXAM YEARS 2026-2028.

What is a partnership?

A partnership is a business owned by between 2 and 20 partners. The partners share the workload, the decisions, the profits and the risks. Partnerships are common for small businesses such as cafés, accountants, doctors, dentists, vets and solicitors, where two or more people want to combine their money and skills.

In Partners in Peril, Amira, Ben and Chloe open the Lemon Tree Café together. By pooling their savings they reach the £50,000 they need to start, and each partner brings different skills. These are two of the biggest advantages of a partnership over a sole trader: more capital and shared expertise.

How are profits shared?

Profits are shared the way the partnership agreement (sometimes called a deed of partnership) says. If there is no agreement, profits are shared equally. A typical exam question gives you a profit ratio and asks you to work out each share.

Worked example: the café makes £40,000 profit and the ratio is 2 : 2 : 1. That is 5 parts, so each part is £40,000 ÷ 5 = £8,000. Amira and Ben get 2 parts each (£16,000) and Chloe gets 1 part (£8,000).

Unlimited liability: the big disadvantage

In an ordinary partnership, every general partner has unlimited liability. If the business cannot pay its debts, the partners must pay them from their own money. That can mean losing their savings, their car and even their house. Each partner is also responsible for decisions made by the other partners, which is why the game's houses are at risk when Ben makes a bad call.

A limited partner (often a sleeping partner) can only lose the money they invested. They must not take part in running the business, and every partnership needs at least one general partner with unlimited liability.

Advantages and disadvantages of partnerships

• Advantages: more capital than a sole trader, shared skills and workload, shared decision making, easy and cheap to set up, and business affairs stay private.
• Disadvantages: unlimited liability for general partners, profits must be shared, partners can disagree, each partner is bound by the others' decisions, and a lack of continuity: if a partner leaves or dies, the partnership ends and a new one must be formed.

Exam tips

• Always link unlimited liability to personal possessions being at risk.
• In profit questions, add up the parts of the ratio first, then divide.
• When you evaluate, compare partnerships with sole traders and private limited companies (Ltd).