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Are owners of a partnership personally liable for business debts?
5. Are owners of a partnership personally liable for business debts?
Legally, a partnership is inseparable from its owners. As a result, each partner (with the exception of the limited partners in a limited partnership) is personally liable for the entire amount of any business-related obligations. This means that if you form a partnership, creditors can come after your personal assets (such as your house or car) to make sure any partnership debts get paid.
In addition, you are legally bound to any business transactions made by you or any of your partners, and you can be held personally liable for those actions. For example, if your partner takes out an ill-advised high interest loan on behalf of the partnership, you can be held personally responsible for the debt.
In contrast, owners of limited liability companies (LLCs) and corporations are not personally liable for business debts.