Final answer:
Mutual agency in a partnership means each partner can make decisions that bind the whole partnership, sharing both responsibility and risk. This allows for shared management but also entails shared liability for each partner's actions.
Step-by-step explanation:
When a partnership has mutual agency, it refers to the legal principle that each partner acts as an agent for the others and can make business decisions and engage in activities that can legally bind the entire partnership. This means that each partner has the authority to share responsibility and risk with one or more partners, and decisions made by one partner are binding on all of them. Additionally, it is implied that partners have complementary skills that help in managing the business effectively.
There are several positives to a general partnership, such as ease of start-up with a partnership agreement, ease of management, and the ability to attract investors. However, the main disadvantage is the shared liability; if one partner incurs debts or commits to actions without the consent of the others, all partners may still be held responsible. This underscores the importance of mutual agency within a partnership structure.