Who pays a debt of an LLP?
The LLP pays a debt of the LLP, out of the property of the LLP. A partner does not become personally liable for that debt only by being a partner. A partner who commits a wrongful act or omission, or who signs a personal guarantee, is in a different position.
Who pays?
Creditors of the business claim against the LLP. The contribution recorded in the agreement is what the partner has agreed to put in. It is not a list of personal assets the creditor can take for an ordinary trade debt. What that limited liability means is on the LLP liability page.
When does a partner pay?
A partner is liable for his or her own wrongful act or omission, and the LLP may be liable for that act as well. Separately, a bank that takes a personal guarantee can enforce the guarantee against the partner who signed it. The LLP Act does not cancel that contract.
What does limited liability not erase?
It does not make the LLP the same as a firm. In a firm, the partners are liable for the firm’s debts. The difference is on the comparison page. It also does not remove a penalty the Act places on a designated partner for a filing the LLP missed. How the LLP is formed is on the registration page.
Frequently asked questions
Four questions cover an ordinary loan, a guarantee, a wrongful act, and a firm.
Can a creditor sue every partner for an ordinary loan?
No. The creditor sues the LLP. A partner is not personally liable for the LLP’s obligation only because he or she is a partner.
Does a personal guarantee change that?
Yes. A partner who signs a guarantee owes the lender under that contract. The guarantee is not created by the LLP Act.
Is a wrongful act limited to the contribution?
No. A partner is liable without that limit for his or her own wrongful act or omission. The LLP can also be liable for it.
Is this the same as a partnership firm?
No. Partners of a firm are liable for the firm’s debts. Partners of an LLP are not, except in the cases the LLP Act states.
Sources
An LLP meets its obligations out of its own property. A partner is not personally liable only by being a partner. A partner’s own wrongful act or omission is unlimited.