What is the liability status of all partners in a partnership regarding debts?

In a partnership, the liability status of all partners is joint and severally liable for debts incurred by the partnership. This means that each partner is individually responsible for the full amount of the partnership’s debts, as well as collectively with all partners. If the partnership cannot pay its debts, creditors can pursue any one partner for the entire amount owed, rather than needing to go after each partner for their proportionate share. This principle ensures that creditors have a reliable means of recovering debts.

This joint and several liability is fundamental to the nature of partnerships, as it means that partners must work in a collaborative and trustworthy manner, since the actions of one partner can create liabilities for all partners involved.

The other options do not accurately represent the liability structure of partnerships. For example, stating that partners are only liable for their own actions neglects the collective responsibilities inherent in a partnership. Similarly, limiting liability to debts incurred after joining the partnership ignores the ongoing obligations existing at the partnership's inception. Lastly, being liable only to the extent of their initial investment misrepresents the full scope of liability, which extends beyond initial capital contributions. Thus, the nature of joint and several liability is a crucial concept to understand within partnership law.