Short answer. Yes, but only after the partnership's own assets are gone. The Civil Code makes all partners liable pro rata with all their property once partnership assets have been exhausted — and industrial partners, who are shielded from losses internally, are named as liable to outside creditors too.
What the law says
All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership
Civil Code, Article 1816 — Pro Rata Liability of Partners. Read the full provision →
The shield is thinner than most people assume
Article 1816 says that all partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership. The phrase to sit with is all their property. A partnership is a separate person from the partners for many purposes, but it does not put a wall around personal assets the way a corporation does. Anyone choosing a partnership because it is cheaper and simpler to set up should understand that this is what the saving costs.
Two protections that are real, if limited
The first is sequence. Personal liability arises only after all the partnership assets have been exhausted, so a creditor must look to the firm before turning to the partners individually. The second is proportion. Liability is pro rata — each partner answers for his share rather than for the whole, which is a materially different exposure from solidary liability, where a creditor may collect everything from whichever partner is easiest to reach. Neither protection is a bar to eventual recovery. They govern the order and the size of the claim against you, not whether one exists.
Industrial partners are not exempt from creditors
The words including industrial ones are there for a reason, and they surprise people. Elsewhere the Code says the partner who contributes services rather than capital is not liable for the losses of the partnership. That protection operates internally, between the partners, when the firm's results are worked out. It does not bind outsiders. A creditor of the partnership may look to the industrial partner as it may to any other. Whether he can then recover from his co-partners is a separate question governed by the internal arrangement.
What limits the exposure in practice
Only two things reliably do. The first is control over who can commit the firm and to what, which means written authority limits communicated to the banks, landlords and suppliers who actually deal with you, since limits kept in a drawer bind nobody. The second is the choice of vehicle: if the business is going to carry real debt, take advice on whether it should be a partnership at all. The article's closing sentence also allows any partner to enter into a separate obligation to perform a partnership contract — read anything you are asked to sign personally with that in mind.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Aniceto G. Saludo, Jr. vs. Philippine National Bank, G.R. No. 193138, August 20, 2018 — read the decision on LawPhil →
- Michael C. Guy vs. Atty. Glenn C. Gacott, G.R. No. 206147, January 13, 2016 — read the decision on LawPhil →