What is meant by unlimited liability of a partner?


Editorial team Published on

Unlimited liability of a partner means that each partner is personally responsible for all debts, lawsuits, and financial obligations of the business.

Key Details

  • Personal Asset Risk: If the business cannot pay its debts, creditors can seize personal assets like homes, cars, and personal bank accounts.
  • No Cap on Loss: Liability is not limited to the amount of money a partner initially invested in the business.
  • Joint and Several Liability: One partner can be held responsible for the entire debt of the business, even if another partner caused it.
  • Common Structures: This applies by default to general partnerships and sole proprietorships, contrasting with a limited liability company which protects personal wealth.