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What is the liability of partners in a partnership business?
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In a partnership business, the liability of partners generally depends on the type of partnership:
- General Partnership: In a general partnership, all partners typically share in the business's operational management and profits. Crucially, they also share unlimited liability for the business's debts and obligations. This means that each partner is personally liable for the full amount of the partnership's debts, even if the debt was incurred by another partner. A partner's personal assets can be used to satisfy the partnership's debts.
- Limited Partnership: A limited partnership has two types of partners: general partners and limited partners. General partners have the same liability as partners in a general partnership – unlimited liability. Limited partners, on the other hand, have limited liability, meaning they are only liable for the amount of their investment in the partnership. Limited partners typically do not participate in the day-to-day management of the business.
- Limited Liability Partnership (LLP): In an LLP, partners have limited liability, meaning they are not personally liable for the negligence or misconduct of other partners. However, they remain liable for their own negligence or misconduct. LLPs are often used by professionals such as lawyers and accountants.
It's important to consult with a legal professional to understand the specific laws in your jurisdiction and to determine the most appropriate partnership structure for your business.
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