What type of liability is assumed by each partner in a partnership?

In a partnership, each partner typically assumes unlimited liability, which means that they are personally responsible for the debts and obligations of the business. This liability extends to their personal assets, meaning creditors can pursue those assets to satisfy business debts if necessary. This structure encourages partners to take their responsibilities seriously, as their own financial situation is at risk if the business encounters issues.

Unlimited liability contrasts with limited liability partnerships, where partners' financial responsibility is restricted to their investment in the partnership. However, in standard partnerships, all partners share this unlimited liability, playing a significant role in how partnerships are structured and the level of risk involved. Understanding the implications of unlimited liability is crucial for those considering entering into a partnership, as it shapes their decision-making and the overall management of the business.