Law firm warns over company debt liability

Business owners operating as a partnership should look to protect themselves from being personally liable for business debts, a law firm has urged.

Mace and Jones law firm, based in the North-West, says it is seeing an increasing number of partnership firms as the economic downturn deepens and business debts mount.

The firm says many business have no legal documentation, leaving them exposed to business creditors who could then go after a business owner’s personal assets.

Graeme Jump, partner at the Mace & Jones partnership unit, says: “The wrath of the recession is bearing down on traditional business partnerships which are often not equipped to protect their owners.

“The reality of personal liability is being brought home, in some cases, for the first time.

“Some partners are finding this very uncomfortable and are wondering how to restructure.”

Jump suggests that the limited liability partnership model can offer business owners better protection.

He adds: “The LLP strengthens the firm and reduces risk. The clinching factor with an LLP is that the business, not the partners, have legal liability to third parties.

“In the current climate it is the protection that an LLP gives that is its most compelling selling point.”