Legal Question in Business Law in California

Re: going out of business

Depends upon the amounts owed, the depth of the former partners' pockets, and the policies of the creditors (not debtors). For amounts in the hundreds of dollars, most will just send letters or refer the debts to collection agencies, which will affect their credit ratings. Over a thousand but under ten thousand, most likely you'll be sued in Small Claims Court. Debts over ten grand are most likely going to result is suits in Superior Court. (Note: The Small Claims lawsuit limit is $7,500 in most cases, sometimes less, but creditors can cut their $10,000 claims down to $7,500 and come out ahead because Small Claims is faster and cheaper to use).

Creditors can and often will sue all the former partners, then enforce their judgments against one or more partners that seem to have assets, such as real property with equity. If you have not done so, you might consider recording a declaration of homestead if you are a homeowner.

Two other things you should consider are (1) being careful to apply all available partnership funds and other assets to paying partnership debts; this avoids possible claims of fraud that would likely arise if the partners "took home" any partnership property of value; and (2) whether filing bankruptcy would be helpful to any of the partners.

Re: going out of business

They come after you personally, that's what partners are for.