The liability of partners is

In a partnership firm, partners have unlimited liability. This is a fundamental characteristic that distinguishes partnerships from companies.

Unlimited liability means that partners are personally responsible for all debts and obligations of the firm. If the firm's assets are insufficient to pay off creditors, the partners must use their personal assets (like personal property, savings, etc.) to settle the firm's debts.

This liability extends beyond the amount of capital they have contributed to the partnership.

Why the other options are incorrect:

Option 1 applies to companies where shareholders' liability is limited to the face value of shares they hold.

Option 2 would mean limited liability (similar to LLP or company), which is not the case in a general partnership.

Option 3 refers to a guarantee concept that doesn't apply to regular partnership firms.

In a partnership, each partner can be held liable for the entire debt of the firm, not just their proportionate share. This is why it's crucial for partners to choose their co-partners carefully and maintain proper financial discipline in the firm.