General Partner Liability for Partnership Debts

General partnerships are legally recognized entities, with a separate identity and existence. Creation, regulation, and characteristics are commonly defined and controlled by state law and may vary. However, despite such variations, many states have adopted common provisions of the Uniform Partnership Act (UPA).

Unlike entities such as corporations, general partnerships do not shield individual partners from personal liability for partnership debts and/or acts or conduct of other partners. The UPA provides for "joint and several liability" against general partners for all partnership obligations incurred after such individuals are deemed "partners" of the partnership.

In other words, an injured party can sue and collect all recoverable damages from just one of the partners, even if another partner caused the damage. The partner sued retains a right to seek indemnity or contribution from other partners, especially the one ultimately responsible for the alleged harm. However, prior to initiating an indemnity or contribution action, the partner may first have to pay the judgment from personal assets.

Contractual Liability

Contracts entered into by a general partner on behalf of the partnership are usually binding on the partnership. Consequently, all partners may also be bound by the contract and liable for damages cause by a breach. If partnership assets do not completely satisfy damages for a breach, a creditor can look to the personal assets of the partners to satisfy the balance, unless the parties have previously agreed otherwise, usually in the contract.

Tort Liability

If a partner, acting within the scope of the partnership or within the partner's authority, commits injures a third party, physically, financially or otherwise, the partnership and the partners may be "jointly and severally" liable for the damages. Lack of knowledge or consent by the other partners regarding the actions leading up to (and/or including) the injury will usually not absolve them of liability. If partnership assets are insufficient to satisfy the damages, the personal assets of the partners may be used, although there is still the right of indemnity and contribution from the other partners.

Liability for Criminal Acts

In general, partners are not liable for criminal acts of co-partners. They may, however, be held criminally liable for a co-partner's crimes as a co-conspirator, if they have knowledge of, and consent to or participate in, the acts. Absent conspiracy, a partner who committed no criminal act will most likely not be held liable.

One exception to the general rule of no criminal liability absent conspiracy may be criminal liability for failure to comply with regulatory statutes. The U.S. Supreme Court has held that a partnership may be held criminally liable for violating Interstate Commerce Commission's regulations. Laws and regulations, as well as liability for fines and other criminal penalties, vary from state to state, but individual partners may face exposure for such activities.