Asset protection

The assets of the partnership may be owned by the partners of the partnership.

Under general law the responsibility for legal liabilities and debts rests jointly with the individual partners. Each partner is a principal and agent for the other partners. This means that each partner is equally liable for each other’s business conduct. For example, if one partner breaches a contract with a customer, the other partners are also automatically liable.

If a debt is incurred by the partnership, generally the partners will be jointly liable for it. Each partner is bound to contribute to partnership debts in the same proportion as they share in the partnership profits, unless they have agreed to do otherwise.

Partners are responsible for legal liabilities and debts ‘jointly and severally’. This means the entire sum that is owed to a creditor by a partnership can be collected from any one of the partners that was a partner at the time the debt was incurred.

Each partner is generally liable for the partnership debts to the full extent of their individually owned assets. Exceptions exist in respect to minors, children under 18 years of age.

Starting a small business

Steps Progress

Is my hobby a business?

9 mins

Business structures overview

5 mins

Business registrations

5 mins

Sole trader structure

7 mins

Partnership structure

10 mins

Company structure

13 mins

Trust structure

7 mins

Small business support

10 mins

Related courses

1 mins

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