Legal Question in Business Law in California

Re: Business partner debt

It depends. If the judgment debtor attaches an asset in his name and it is being used by the business yes. Also they can try and get his part of the partnership. So, you need to be careful how you take ownership of assets and the bank accounts. It is risky.

Re: Business partner debt

In addition to the previous post, consider that general partners are each personally liable for the debts of the partnership irrespective of which partner actually authorized the debt. Given your friend's history, you may find yourself in a difficult spot down the road if you form a general partnership with him.

Re: Business partner debt

Partners are unlimitedly liable for the actions and debts of their partners. I never allow clients to enter general partnerships [ LLP's are different ]. If this is a legitimate business, form a corporation in some form. There are ways for you to protect yourself from his debts in the corporation, possibly including use of a Trust to hold his shares. Feel free to contact me if you get serious about doing this right.

Re: Business partner debt

Be safe and incorporate. Contact me directly.

Re: Business partner debt

You are looking for trouble.

All of the assets of every partner are on the hook for partnership debts.

Any partner can incur a debt on behalf of the partnership.

A partner's interest in the partnership is attachable to pay the partner's personal debts.

Use an entity, at first blush a corporation. Contact an attorney to figure out the best way for your business to be set up.

Re: Business partner debt

The prior answers are correct but may be confusing, since they don't directly address your question.

Neither a partnership nor the other partners can be held liable for debts a partner incurs individually, regardless of when they are incurred. However, his creditors can potentially reach virtually all of his assets -- including his share of the partnership.

Thus, you and the third partner can't be held liable for the other partner's debt, debt and neither can the partnership itself. The creditor, however, can "cash out" some or all of the debtor's interest in the partnership in order to satisfy the debt. As Mr. Russakow notes, creditors can also reach any of the debtor's personal assets, even if they are being used by the partnership.

If your partner incurs new debts in the partnership's name, then you, the third partner and the partnership itself can be held liable for them.

Be careful, and make sure you know what you are getting yourself into.