Final answer:
The downside of equity alliances includes joint liability for partners' actions, risk to personal assets, potential instability with partners' turnover, and difficulty in dissolving the alliance. Despite these downsides, partnerships can attract investors and offer ease of management. The correct option is C. that the alliances cannot be abandoned if not promising.
Step-by-step explanation:
The downside of equity alliances is primarily related to the joint liability and legal and financial ties that bind the partners together. Unlike a limited liability partnership, where personal assets are protected, in a general partnership, each partner can be held responsible for another's actions, including incurring debts and liabilities.
This can be particularly risky if one partner acts unscrupulously or without the consent of the others. Additionally, general partnerships are often limited in terms of lifespan and can change significantly when one partner leaves or a new partner is introduced, affecting the continuity and stability of the business.
Despite these risks, partnerships can offer various benefits, such as ease of formation, management simplicity, and the potential to attract investors. However, in the context of equity alliances, the investments required and the potential for personal asset loss in the event of bankruptcy or lawsuits are significant drawbacks. It's also important to note that such alliances are not easily abandoned, leading to potential long-term complications if the partnership turns out to be less profitable or strategically viable than anticipated.