Q: Partners liability for all Partnership debt. Does that mean that personal guarantees of the Partners on commercial loans are not necessary?
A: It is always prudent to require a personal guarantee from one or more general partners even though, in theory, general partners are legally responsible for all partnership debt. In bankruptcy, it can become very messy sorting out and enforcing legal obligations. Further, there may be provisions in the partnership agreement that limit one or more general partners to specific debt amounts or to no debt amount at all. Therefore, a personal guarantee from all general partners in a partnership is a very practical step in protecting the lender.
Course overview: Business Income Tax Returns