LIABILITIES OF PARTNERS

Law of Business Organization

Prepared by;
M. Zaigham Bhojani
BL-0245
BA. LLB (VI-A)
 An Analysis on the Liabilities of Partners in Partnerships

Introduction;

Section 4 of Partnership Act 1932 defines Partnership as “Partnership is the relation

between persons who have agreed to share the profit of business carried on by all or
any one of them acting for all.” In short the term is defined as a voluntary contract
between two or more competent persons to place their money, effects, labour and
skill or some or all of them in lawful business with the understanding that there shall
be sharing of profit between them.
Limited Liability Partnership, shortly known as LLP is described as a body corporate
created and registered under Limited Liability Partnership Act, 2017. LLP is a
business vehicle that integrates the advantages of limited liability of a company and
the flexibility of the partnership, i.e. for organizing their internal composition and
operation as a partnership.
The partnership is governed by the The Partnership Act, 1932. On the contrary,
Limited Liability Partnership Act, 2017 governs LLP in Pakistan.

Liabilities of Partners in General;

 Partners in a firm are jointly and severally liable for the losses of the firm.
 Every partner shall indemnify the firm for any loss caused to it by his fraud in
conduct of the business of the firm
 Every partner is bound to attend diligently to do his duties in conduct of his
business.
 Partners are entitle to share equally in the profits earned and shall contribute
equally to the profits sustained by the firm.
 A partner shall indemnify the firm for any loss caused to it by hill willful
negligence in conduct of the business of the firm.
 If a partner derives any profit for himself from any transaction of the firm he
shall account for that profit and pay it to the firm.
 Where a partner acting in ordinary course of business or under authority of
other partners cause loss to any third party, all partners are liable.
 All partners of firm are personally liable for the debts and obligations of firm
and such liability extends to their personal assets too as there is no separate
legal personality of firm.

Liabilities of Partner in Limited Liability Partnership;

 Partners are not personally liable for the losses sustained by firm.
 Partners in LLP are protected from liability created by another partner.
 Partners are protected from any liability that arises out of misconduct of
fraudulent activities of another partner.
 If an act or omission committed by partner is not within course of business
then only partner who commit the act or omission will be personally liable and
LLP will not be liable.
 In case of fraud, a partner is personally liable.