Partnership Dispute: Am I Liable For A Business Partner’s Debt In Florida?

Disagreements between business partners can be among the most challenging commercial disputes to navigate. Partnership disputes can arise for a wide range of different reasons—debt is often an area of concern.

You may be wondering: Are you liable for your business partner’s debt? In Florida, the answer depends on many factors—including the specific circumstances surrounding the debt, the structure of your business, and your partnership agreement.

In this article, our West Palm Beach partnership dispute lawyer highlights the key considerations that will determine whether or not you can be held liable for the debt incurred by your business partner in Florida.

First Consideration: What Type of Debt is at Issue? 

First and foremost, you need to consider the type of debt that is at issue. Whether you can face liability for your business partner’s debts depends on how and why that debt was incurred. You do not need to worry about liability for their personal debt—as long as that personal debt is truly not related to your business in any way. For example, if your business partner defaults on their credit card that they used for only personal expenses, you are not at issue. However, you could face liability if the debt in question is a business debt. 

Second Consideration: How is Your Partnership Structured? 

The structure of a partnership is a very important consideration when evaluating potential liability for a partner’s debt. It is imperative that you understand that there are several different types of partnership entities in Florida—each entity offers a different level of legal liability protection.

On one end of the spectrum, a general partnership (GP) offers no legal liability protection. All partners of a general partnership are responsible for debts/liabilities of the business. However, limited partnerships (LPs), limited liability partnerships (LLPs), and limited liability limited partnerships (LLLPs) offer varying levels of liability protection. If you are a member of an LLP, you are in a far better position to limit your risk of liability for your business partner’s debt. 

Third Consideration: What Does the Partnership Agreement Say? 

Finally, the terms of the partnership agreement always matter. If a legal dispute arises between business partners over debt, a Florida court will adjudicate the issue by looking at the terms of the partnership agreement. There may be provisions within the agreement that protect you against personal liability for a business partner’s debt. However, it could also go in the other direction. It is crucial that you have a professionally-drafted partnership agreement that effectively protects your interests. 

Schedule a Confidential Consultation With a Partnership Lawyer in South Florida

At Pike & Lustig, LLP, we provide solutions-driven legal guidance and support in partnership disputes. If you are locked in a dispute with a business partner over liability for debt, our attorneys are here to help. Give us a call now or connect with us directly through our website to set up your confidential initial consultation. We represent business partners throughout Southeast Florida.