General Partnership

• A. Each Partner Is Responsible for the Partnership’s Debts up to the Limits of His Own Private Resources and Held Individually Liable for Any Business Losses and Obligations
• B. Each Partner Is Personally Liable for Partnership Debts
• C. Only Passive Investors Have Liability
• D. The Partnership Is a Separate Legal Entity with Limited Liability

Answer: (A)

In a general partnership, partners face personal, unlimited liability for the business’s obligations. This means creditors can reach a partner’s own assets to satisfy partnership debts, and any partner can be held responsible for the entire amount owed, not just their share. The statement that best expresses this is that each partner is responsible for the partnership’s debts to the extent of his own private resources and is held individually liable for any business losses and obligations. It captures both the personal nature of the liability and the potential for those liabilities to exceed each partner’s initial investment.

The other options misstate or understate the liability structure: a general partnership is not a separate entity with limited liability, passive investors do not bear liability in this setup, and merely saying partners are personally liable for partnership debts doesn’t convey the full scope of personal assets and potential joint liability among partners.