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ACTPACO Lecture Notes

ACTPACO Lecture Notes

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Published by Johan Lourens

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Published by: Johan Lourens on Jun 20, 2012
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– a contract whereby two or more persons bind themselves to contributemoney, property or industry into a common fund with the intention of dividing the profitamong themselves (Article 1767 of the Civil Code of the Philippines).
Characteristics of a Partnership
Mutual agency 
– any partner may act as an agent of the partnership inconducting its affairs. Each partner has an equal right to act for the partnershipand to enter into contracts binding upon it, as long as he acts within the normalscope of business operations.
Limited life
– a partnership may be dissolved at any time by action of thepartners or by operation of law. The withdrawal, death, retirement, bankruptcy,incapacity of a partner and the admission of a new partner dissolves thepartnership.
Unlimited liability 
– the personal assets of a general partner may be used tosatisfy the claims of the creditors of the partnership if the partnership assets arenot enough to settle the liabilities to outsiders upon liquidation.
Co-ownership of property 
– properties contributed to the partnership are ownedby the partnership. Properties invested by a partner cease to be his ownpersonal property.
Co-ownership of profit 
– a partner has the right to share in partnership profits.The partners are entitled to share in the firm’s profits as a return on their investment.
Legal entity 
– a partnership has a legal personality separate and distinct fromthat of each of the partners. A partnership may, therefore, acquire property in itsown name and may enter into contracts.
 Advantages of a Partnership
1.It is easy to form and to dissolve. A partnership is ended whenever there arechanges in the ownership structure such as withdrawal of a partner or admissionof a new partner.2.Greater amount of capital may be raised compared to a sole proprietorship. Thesource of capital investment comes from 2 or more persons.
3.There is relative freedom and flexibility in decision-making compared to acorporation. Decisions are effected simply by agreement among the partnerswithout the formalities necessary under a corporation.4.It is better managed because business affairs are supervised by more than oneperson. Better management results from the combined experience and ability of several individuals.5.The unlimited liability of a general partner makes it reliable from the point of viewof creditors.
Disadvantages of a Partnership
1.The unlimited liability of a partnership deters many from investing in apartnership.2.There is lack of business continuity because it can be easily dissolved.3.There is difficulty in transferring ownership interest because ownership interest inthe partnership cannot be transferred without the consent of all the partners.4.Limited amount of capital may be raised compared to a corporation.5.There is likelihood of dissension and disagreement when each of the partnershas the same authority in the management of the firm.
Kinds of Partnerships
1.According to activity 
 – main activity is the rendering of services
Merchandising or Trading 
– main activity is the purchase or sale of goods
– main activity is the production of goods
2.According to liability 
 – one consisting of general partners who are liable prorate andsometimes solidarily with their separate property for partnership liabilities.
– one consisting of one or more general partners and one or morelimited partners. “LTD” is added to the name of the partnership.
3.According to objec
Universal partnership of all present property 
– one in which the partnerscontribute all the property which actually belong to each of them, at thetime of the constitution of the partnership, to a common fund with theintention of dividing the same among them as well as the profits whichthey may acquire therewith. All assets contributed to the partnership andsubsequent acquisitions become common partnership assets.
Universal partnership of profits
– one which comprises all that the partnersmay acquire by their industry or work during the existence of thepartnership and the usufruct of movable or immovable property whicheach of the partners may possess at the time of the institution of thecontract. The original movable or immovable property contributed do notbecome common partnership assets.
Particular partnership
– one which has for its object determinate things,their use or fruits or a specific undertaking or the exercise of a professionof vocation.
Kinds of Partners
a. According to Investment 
– one who contributes capital in money or property.
– one who contributes industry, labor, skill or service.
– one who contributes money, property and industry
b. According to Liability 
– one whose liability to third persons extends to his private property
– one whose liability to third persons is limited only to the extent of hiscapital contribution to the partnership.
c. According to Participation
- a partner in name only.
 – one who takes active part in the business but whose connection withthe partnership is concealed or unknown to the public.

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