Definition

Unlimited liability

Each partner is personally and individually liable for all partnership liabilities. Creditor’s claims attach first to partnership assets. If these are insufficient, the claims then attach to the personal resources of any partner, irrespective of that partner’s equity in the partnership. Because each partner is responsible for all the debts of the partnership, each partner is said to have unlimited liability.


Unlimited liability is the owner’s personal responsibility for any debts or damages incurred by the operation of a business.


The obligation of investors to use personal assets, when necessary, to pay off debts to business creditors; a disadvantage of sole proprietorships and partnerships.

Share it:  Cite

More from this Section

  • The partnership agreement
    Ideally, the agreement of two or more individuals to form a partnership should be expressed ...
  • Drawings
    Drawings refer to the withdrawal of cash or other assets from an unincorporated business ...
  • Other expenses and losses
    A non operating activities section of the income statement that shows expense from auxiliary ...
  • Conversion costs
    Conversion costs consists of the sum of labor costs and overhead costs. In other words, ...
  • Sales invoice
    A sales invoice is a business document or a written evidence of the sale that supports ...