Who is liable for third-party claims in a general part­ner­ship? At the end of the day, as is the case with all part­ner­ships, the partners must per­son­al­ly vouch with their entire assets (up to the seizure limit) for claims against the company. Nev­er­the­less, it is still possible to dif­fer­en­ti­ate between two cases in liability questions in con­nec­tion with a general part­ner­ship:

  • General part­ner­ship as a subject of liability
  • General part­ner­ship partners as liability subjects

A liability subject is the target of a creditor’s claim.

The general part­ner­ship as the subject of liability

The general part­ner­ship does not have its own legal per­son­al­i­ty (it is not a “legal” person). However, it is party capable and can be reg­is­tered under the company name (legally: “company”) and…

  • Act as a legally in­de­pen­dent entity
  • Acquire rights and oblig­a­tions
  • Own property
  • Incur li­a­bil­i­ties
  • Be sued

Claims against a general part­ner­ship are legally separate from claims against general partners. If a creditor has a claim against the general part­ner­ship, then the company is the liable party. A possible execution is directed against the assets of the general part­ner­ship, and for this purpose a debt in­stru­ment is also required which is directed against the general part­ner­ship. With a title against all partners, demands cannot be in­ter­spersed among the partners against each other.

General partners as liability subjects

As mentioned above, all partners in a general part­ner­ship are liable with their entire assets for general part­ner­ship li­a­bil­i­ties, namely …

  • Primary and immediate
  • Unlimited
  • Jointly

This cannot be re­strict­ed by agree­ments with third parties. Due to the primary, direct liability, a general part­ner­ship creditor can address their claim directly to general partners without first having to claim against the company. In this respect, the partners are liable. However, they can refuse to pay if the general part­ner­ship has the right to contest the un­der­ly­ing legal trans­ac­tion or if the claim can be set off against a due claim of the company. This means the legality of the claim against the partners results from the legal re­la­tion­ship with the company.

The con­se­quence of joint and shared liability is that, if necessary, each partner in a general part­ner­ship must answer not only for part of the liability, but for the entire claim. However, the creditor may only demand payment once.

A partner who satisfies the general part­ner­ship’s creditor’s claim can be com­pen­sat­ed by the company for the expenses incurred.

Tip

In practice, it is rec­om­mend­ed that creditors pursue special claims against both the general part­ner­ship and the in­di­vid­ual partner, in the case of en­force­ment, separate debt in­stru­ments are required in order to be able to enforce the general part­ner­ship in the assets of the different legal entities.

Special features per­tain­ing to general partners’ liability

With regard to the liability of general partners, the law provides for special reg­u­la­tions if partners leave the general part­ner­ship, if a new one joins or if the company is dissolved.

Entry of a new partner

If a new partner joins an existing general part­ner­ship, they are liable for all company li­a­bil­i­ties incurred before their joining.

With­draw­al of a partner

If a partner decides to quit a general part­ner­ship, they continue to be liable for any debts incurred during their time as a partner and up to five years after their departure.

Liability once a general part­ner­ship has been dissolved

If a general part­ner­ship is dissolved by a partner res­o­lu­tion, for example, they will continue to be liable for the company’s debts with their private assets. This liability usually also lasts for five years.

Note

It is important to bear in mind that in the event of a legal dispute, any terms set out within the articles of as­so­ci­a­tion are given con­sid­er­a­tion over state laws. State laws con­cern­ing general part­ner­ship liability generally exist to clarify in the case of there being no articles of as­so­ci­a­tion when the part­ner­ship is founded, or if the articles of as­so­ci­a­tion do not contain pro­vi­sions for a certain liability scenario. This is why it is of the utmost im­por­tance that com­pre­hen­sive articles of as­so­ci­a­tion are drawn up before partners get involved in a general part­ner­ship. If you are un­con­fi­dent about your ability to draw up an articles of as­so­ci­a­tion agreement, or have questions per­tain­ing to in­for­ma­tion contained in one, the best course of action is to consult a legal pro­fes­sion­al to ensure that you are legally covered in all cases.

Click here for important legal dis­claimers.

Reviewer

  • Anne-Laure Wolber
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