What responsibility does a retiring partner have regarding their liability?

A retiring partner in a partnership retains certain responsibilities that pertain to their liability for debts. According to partnership law, a partner is generally liable for partnership debts incurred during their time as an active partner, and this continues until they have formally retired from the partnership. The correct choice reflects this principle, indicating that the retiring partner remains liable for debts that were incurred up until the point of their formal retirement.

This is important because it establishes that even after a partner has agreed to retire, their prior engagements and obligations to creditors do not simply disappear. The formal retirement must be communicated clearly, and until such an agreement is in effect, the partner can still be held accountable for any debts accrued by the partnership during their tenure.

Partners need to be aware of the timing and processes involved in retirement to limit their liabilities effectively. It is common practice for partnerships to execute a formal retirement agreement which might include provisions that clarify how ongoing and former liabilities will be handled, but such agreements do not negate the inherent legal responsibilities that existed up to the point of retirement.