For more on deadbeat business partners, here’s another thought: if you have been running your business as a general partnership, you are both “jointly and severally liable” for the debts of the partnership. This means that a creditor could come after you for the full amount of the debt, or your partner. They don’t have to come after you 50/50. If you get saddled paying back the full amount of the debt, too bad, so sad. Your only recourse is to find your partner and “encourage” him/her (whether by lawsuit or otherwise) to pay you back for his/her share of the debt. If your partner is broke and the creditor then comes for you (after unsuccessfully trying to get paid from your partner), you’re on the line.
Good reasons to have (1) a properly formed entity to protect your personal assets, and (2) a partnership agreement covering the payment of more than one’s fair share of the debt. It’s also a good reason to check out the creditworthiness of your partner before you go into business with them. Why should you be saddled with the debt because you’re the one who has handled her finances properly?
