Liability of Partners to Third Parties Flashcards
General Partner Liability for GP v. LP v. LLP
The liability rules for general partners are the same for GPs and LPs. Only in a LLP is a general partner’s exposure to personal liability limited.
General Partner Liability For Another Partner’s Torts
-A partnership is liable for torts committed by a partner when the partner’s tort is committed in the ordinary course of business or with authority of the partnership.
General Partner Liability for Partnership Obligations
All general partners are liable jointly and severally for all obligations of the partnership, whether arising under tort, K, or otherwise, unless otherwise agreed by the claimant or provided by law.
General Partner’s Right to Contribution
Each general partner has unlimited liability. However, whenever partners are required to pay more than their share of the partnership debts, they may compel other partners to pay their pro rata share by suing them for contribution.
What About Incoming Partners?
An incoming partner is not personally liable for partnership obligations arising from activity that occurred before their admission as a partner.
Creditor’s Rights (for a Partner’s Individual Debt)
A creditor of a partner in their individual capacity cannot seek satisfaction from the partnership or the partnership’s other partners. However, such a creditor is limited to seeking satisfaction from this individual partner’s PP (which does include the partner’s share of the partnership’s profits and the partner’s right to receive distributions)
Liability of Limited Partners
- In general, a limited partner is not personally liable for the obligations of the partnership; their liability will be limited to their capital contribution. This limited exposure to liability follows from the limited partner’s limited role in conducting partnership business.
- Whether or not the limited partner participates in the management or control of the limited partnership is immaterial.
Liability for a LLP
The UPA provides that any obligations incurred by a LLP, whether arising in K, tort, or otherwise, are solely the obligation of the partnership (general partners gain protection from personal liability for the LLP’s conduct). However, partners are still liable for their own wrongful acts.
LLP Liability: Workers Under One’s Control
Under some statutes, though not the UPA, partners in an LLP may also become liable for the negligence, wrongful acts or misconduct of any person under the partner’s direct supervision and control.
