Ateneo notes (2002) PARTNERSHIP - by the contract of partnership, 2 or more persons bind themselves to contribute money, property or industry

to a common fund, with the intention of dividing the profits among themselves ESSENTIAL FEATURES: 1. There must be a valid contract 2. The parties must have legal capacity to enter into the contract 3. There must be a mutual contribution of money, property, or industry to a common fund 4. The object must be lawful 5. The purpose or primary purpose must be to obtain profits and divide the same among the parties PARTNERSHIP DISTINGUISHED FROM CO-OWNERSHIP AND CORPORATION
Creation Juridical personality Purpose Duration/ Term of existence Disposal/ Transferability of interest Power to act with 3rd persons Effect of death Dissolution No. of incorporators Commence ment of !uridical personality PARTNERSHIP Created by a contract, my mere agreement of the parties Has a juridical personality separate and distinct from that of each partner Realization of profits No limitation %artner may not dispose of his indi&idual interest unless agreed upon by all partners n absence of stipulation to contrary, a partner may bind partnership *each partner is agent of partnership+ Death of partner results in dissolution of partnership ,ay be dissol&ed at any time by the will of any or all of the partners ,inimum of . persons /rom the moment of e#ecution of contract of partnership CO-OWNERSHIP Created by law None Common enjoyment of a thing or right !" years ma#imum Co'owner may freely do so Co'owner cannot represent the co'ownership Death of co'owner does not necessarily dissol&e co' ownership ,ay be dissol&ed anytime by the will of any or all of the co' owners ,inimum of . persons /rom date of issuance of certificate of incorporation by the (0C CORPORATION Created by law Has a juridical personality separate and distinct from that of each partner Depends on AO $" years ma#imum, e#tendible to not more than $" years in any one instance (toc)holder has a right to transfer shares without prior consent of other stoc)holders ,anagement is &ested with the -oard of Directors Death of stoc)holder does not dissol&e corporation Can only be dissol&ed with the consent of the state ,inimum of $ incorporators

NO PRESUMPTION OF PARTNERSHIP FROM RECEIPT OF PROFITS: 1. 2. 3. 4. 5. s debt by installment s wages or rent s annuity s interest on loan s consideration for sale of goodwill of business!other property by installments

SIMILARITIES BETWEEN A PARTNERSHIP AND A CORPORATION 1. "oth have juridical personality separate and distinct from that of the individuals composing it 2. "oth can only act through agents 3. "oth organi#ations are composed of an aggregate of individuals $e%cept corporation sole& 4. "oth distribute profits to those who contribute capital to the business 5. "oth can only be organi#ed when there is a law authori#ing their organi#ation '. "oth are ta%able as a corporation EFFECTS OF UNLAWFUL PARTNERSHIP 1. The contract is void ab initio and the partnership never e%isted in the eyes of the law 2. The profits shall be confiscated in favor of the government 3. The instruments or tools and proceeds of the crime shall also be forfeited in favor of the government 4. The contributions of the partners shall not be confiscated unless they fall under no. 3 FORM OF PARTNERSHIP CONTRACT GENERAL RULE( )o special form is re*uired for the validity of the contract E CEPTIONS: 1. Where immovable property/real rights are contributed a. +ublic instrument is necessary b. ,nventory of the property contributed must be made, signed by the parties and attached to the public instrument otherwise it is -.,/

2. Where capital is P3,000 or more, in money or property a. +ublic instrument is necessary b. 0ust be registered with 123 CLASSIFICATIONS OF PARTNERSHIP !" As to e#tent o$ %ts s&'(e)t *+tte, +" UNI-ERSAL PARTNERSHIP i. UNI-ERSAL PARTNERSHIP OF ALL PRESENT PROPERT. - comprises the following( a& +roperty which belonged to each of the partners at the time of the constitution of the partnership b& +rofits which they may ac*uire from all property contributed %%" UNI-ERSAL PARTNERSHIP OF PROFITS - comprises all that the partners may ac*uire by their industry or wor4 during the e%istence of the partnership Note: Persons who are prohibited from giving donations or advantage to each other cannot enter into a universal partnership b. PARTICULAR PARTNERSHIP 5 has for its objects( i. /eterminate things ii. Their use or fruits iii. 1pecific underta4ing iv. 2%ercise of profession or vocation 2" As to /%+'%/%t0 o$ 1+,tne,s a. GENERAL PARTNERSHIP 5 consists of general partners who are liable pro rata and subsidiarily and sometimes solidarily with their separate property for partnership debts b. LIMITED PARTNERSHIP 5 one formed by 2 or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for the obligations of the partnership 2" As to 3&,+t%on a. PARTNERSHIP AT WILL 5 one in which no time is specified and is not formed for a particular underta4ing or venture which may be terminated anytime by mutual agreement

b. PARTNERSHIP WITH A FI ED TERM 5 the term for which the partnership is to e%ist is fi%ed or agreed upon or one formed for a particular underta4ing 4" As to /e5+/%t0 o$ e#%sten)e a. DE 6URE PARTNERSHIP 5 one which has complied with all the legal re*uirements for its establishment b. DE FACTO 5 one which has failed to comply with all the legal re*uirements for its establishment 7" As to ,e1,esent+t%on to ot8e,s a. ORDINAR. OR REAL PARTNERSHIP 5 one which actually e%ists among the partners and also as to 3rd persons b. OSTENSIBLE OR PARTNERSHIP B. ESTOPPEL 5 one which in reality is not a partnership but is considered a partnership only in relation to those who, by their conduct or omission, are precluded to deny or disprove its e%istence 9" As to 1&'/%)%t0 a. SECRET PARTNERSHIP 5 one wherein the e%istence of certain persons as partners is not avowed or made 4nown to the public by any of the partners b. OPEN OF NOTORIOUS PARTNERSHIP 5 one whose e%istence is avowed or made 4nown to the public by the members of the firm :" As to 1&,1ose a. COMMERCIAL OR TRADING PARTNERSHIP 5 one formed for the transaction of '&s%ness b. PROFESSIONAL OR NON TRADING PARTNERSHIP 5 one formed for the e%ercise of a profession ;INDS OF PARTNERS 1. CAPITALIST 5 one who contributes money or property to the common fund 2. INDUSTRIAL 5 one who contributes only his industry or personal service 3. GENERAL 5 one whose liability to 3rd persons e%tends to his separate property 4. LIMITED 5 one whose liability to 3rd persons is limited to his capital contribution

5. MANAGING 5 one who manages the affairs or business of the partnership '. LI<UIDATING 5 one who ta4es charge of the winding up of partnership affairs upon dissolution 6. PARTNERS B. ESTOPPEL 5 one who is not really a partner but is liable as a partner for the protection of innocent 3rd persons 7. CONTINUING PARTNER 5 one who continues the business of a partnership after it has been dissolved by reason of the admission of a new partner, retirement, death or e%pulsion of one of the partners 8. SUR-I-ING PARTNER 5 one who remains after a partnership has been dissolved by death of any partner 19. SUBPARTNER 5 one who is not a member of the partnership who contracts with a partner with reference to the latter:s share in the partnership 11. OSTENSIBLE 5 one who ta4es active part and 4nown to the public as partner in the business 12. SECRET 5 one who ta4es active part in the business but is not 4nown to be a partner by outside parties 13. SILENT 5 one who does not ta4e any active part in the business although he may be 4nown to be a partner 14. DORMANT 5 one who does not ta4e active part in the business and is not 4nown or held out as a partner RELATIONS CREATED B. A CONTRACT OF PARTNERSHIP 1. ;elations among the partners themselves 2. ;elations of the partners with the partnership 3. ;elations of the partnership with 3rd persons with whom it contracts 4. ;elations of the partners with such 3rd persons OBLIGATIONS OF THE PARTNERS A. OBLIGA ION! O" #$ PA% N$%! A&ONG #$&!$L'$! O'/%5+t%ons =%t8 ,es1e)t to )ont,%'&t%on o$ 1,o1e,t0:

1. To contribute at the beginning of the partnership or at the stipulated time the money, property or industry which he may have promised to contribute 2. To answer for eviction in case the partnership is deprived of the determinate property contributed 3. To answer to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of actual delivery 4. To preserve said property with the diligence of a good father of a family pending delivery to partnership 5. To indemnify partnership for any damage caused to it by the retention of the same or by the delay in its contribution E$$e)t o$ F+%/&,e to )ont,%'&te 1,o1e,t0 1,o*%se3: 1. +artners becomes ipso jure a debtor of the partnership even in the absence of any demand 2. ;emedy of the other partner is not rescission but specific performance with damages from defaulting partner O'/%5+t%ons =%t8 ,es1e)t to )ont,%'&t%on o$ *one0 +n3 *one0 )on>e,te3 to 1e,son+/ &se 1. To contribute on the date fi%ed the amount he has underta4en to contribute to the partnership 2. To reimburse any amount he may have ta4en from the partnership coffers and converted to his own use 3. To pay for the agreed or legal interest, if he fails to pay his contribution on time or in case he ta4es any amount from the common fund and converts it to his own use 4. To indemnify the partnership for the damages caused to it by delay in the contribution or conversion of any sum for his personal benefits

PROHIBITION AGAINST ENGAGING IN BUSINESS

P"#$%&%T%#N INDUSTRIAL PARTNER ndustrial partner cannot engage in business *w1n same line of business with the partnership+ unless partnership e#pressly permits him to do so Capitalist partners may2 !3 0#clude him from the firm, or .3 A&ail themsel&es of the benefits which he may ha&e obtained 43 Damages, in either case Note: It is believed that industrial partners are also entitled to the remedy granted since they are equally prejudiced CAPITALIST PARTNER Capitalist partner cannot engage in business *with same )ind of business with the partnership+ for his own account, unless there is a stipulation to the contrary Capitalist partner in &iolation shall2 !3 -ring to common fund any profits accruing to him from said transaction, and .3 -ear all losses

"E'ED(

O'/%5+t%ons =%t8 ,es1e)t to )ont,%'&t%on to 1+,tne,s8%1 )+1%t+/ 1. +artners must contribute e*ual shares to the capital of the partnership unless there is stipulation to contrary 2. +artners $capitalist& must contribute additional capital ,n case of imminent loss to the business of the partnership and there is no stipulation otherwise< refusal to do so shall create an obligation on his part to sell his interest to the other partners Re?&%s%tes: a. There is an imminent loss of the business of the partnership b. The majority of the capitalist partners are of the opinion that an additional contribution to the common fund would save the business c. The capitalist partner refuses deliberately to contribute $not due to financial inability& d. There is no agreement to the contrary O'/%5+t%on o$ *+n+5%n5 1+,tne,s =8o )o//e)ts 3e't $,o* 1e,son =8o +/so o=e3 t8e 1+,tne,s8%1 1. pply sum collected to 2 credits in proportion to their amounts

2. ,f he received it for the account of partnership, the whole sum shall be applied to partnership credit

Re?&%s%tes: a. There e%ist at least 2 debts, one where the collecting partner is creditor and the other, where the partnership is the creditor b. "oth debts are demandable c. The partner who collects is authori#ed to manage and actually manages the partnership O'/%5+t%on o$ 1+,tne, =8o ,e)e%>es s8+,e o$ 1+,tne,s8%1 ),e3%t 1. .bliged to bring to the partnership capital what he has received even though he may have given receipt for his share only Re?&%s%tes: a. partner has received in whole or in part, his share of the partnership credit b. The other partners have not collected their shares c. The partnership debtor has become insolvent RIS; OF LOSS OF THINGS CONTRIBUTED
(pecific and determinate things which are not fungible where only the use is contributed (pecific and determinate things the ownership of which is transferred to the partnership /ungible things *consumable+ 5hings contributed to be sold 5hings brought and appraised in the in&entory Ris) is borne by partner Ris) is borne by partnership Ris) is borne by partnership Ris) is borne by partnership Ris) is borne by partnership

RULES FOR DISTRIBUTION OF PROFITS AND LOSSES

)ith a*reement )ithout a*reement DISTRIBUTION OF PROFITS According to agreement !3 (hare of capitalist partner is in proportion to his capital contribution .3 (hare of industrial partner is not fi#ed ' as may be just and e6uitable under the circumstances DISTRIBUTION OF LOSSES According to agreement !3 f sharing of profits is stipulated ' apply to sharing of losses .3 f no profit sharing stipulated ' losses shall be borne according to capital contribution 43 %urely industrial partner not liable for losses

RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT

Partner is appointed mana*er in the articles of partnership Partner is appointed mana*er after constitution of partnership + or more persons entrusted with mana*ement of partnership without specification of duties/stipulation that each shall not act w/o the other,s consent -tipulated that none of the mana*in* partners shall act w/o the consent of others 'anner of mana*ement not a*reed upon %ower of managing partner is 8ote of partners representing controlling irre&ocable without just1lawful interest necessary to re&o)e power cause7 Re&ocable only when in bad faith %ower is re&ocable any time for any cause 0ach may e#ecute all acts of n case of opposition, decision of majority administration shall pre&ail7 n case of tie, decision of partners owning controlling interest shall pre&ail Concurrence of all necessary for Absence or disability of any one cannot the &alidity of acts be alleged unless there is imminent danger of gra&e or irreparable injury to partnership !3 All partners are agents of the f refusal of partner is manifestly partnership prejudicial to interest of partnership, court:s inter&ention may be sought .3 9nanimous consent re6uired for alteration of immo&able property

Ot8e, ,%58ts +n3 o'/%5+t%ons o$ 1+,tne,s: 1. ;ight to associate another person with him in his share without consent of other partners $subpartnership& 2. ;ight to inspect and copy partnership boo4s at any reasonable hour 3. ;ight to a formal account as to partnership affairs $even during e%istence of partnership&( a. ,f he is wrongfully e%cluded from partnership business or possession of its property by his copartners b. ,f right e%ists under the terms of any agreement c. s provided by art 1796

d. =henever other circumstances render it just and reasonable 4. /uty to render on demand true and full information affecting partnership to any partner or legal representative of any deceased partner or of any partner under legal disability 5. /uty to account to the partnership as fiduciary

B. P%OP$% ( %IG# ! O" A PA% N$% 1. >is rights in specific partnership property 2. >is interest in the partnership 3. >is right to participate in the management N+t&,e o$ 1+,tne,@s ,%58t %n s1e)%$%) 1+,tne,s8%1 1,o1e,t0 1. 2*ual right to possession 2. ;ight not assignable 3. ;ight limited to share of what remains after partnership debts have been paid N+t&,e o$ 1+,tne,@s ,%58t %n t8e 1+,tne,s8%1 1. 1hare of profits and surplus ). OBLIGA ION O" PA% N$%! *I # %$GA%+ O ,%+ P$%!ON! 1. 2very partnership shall operate under a firm name. +ersons who include their names in the partnership name even if they are not members shall be liable as a partner 2. ll partners shall be liable for contractual obligations of the partnership with their property, after all partnership assets have been e%hausted a. +ro rata b. 1ubsidiary 3. dmission or representation made by any partner concerning partnership affairs within scope of his authority is evidence against the partnership 4. Notice to partner o any matter relating to partnership a airs operates as notice to partnership e!cept in case o raud" a. ?nowledge of partner acting in the particular matter ac*uired while a partner b. ?nowledge of the partner acting in the particular matter then present to his mind c. ?nowledge of any other partner who reasonably could and should have communicated it to the acting partner 5. +artners and the partnership are solidary liable to 3rd persons for the partner:s tort or breach of trust

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#. $iability o incoming partner is limited to" a. >is share in the partnership property for e%isting obligations b. >is separate property for subse*uent obligations 6. 3reditors of partnership preferred in partnership property @ may attach partner:s share in partnership assets 7. 2very partner is an agent of the partnership POWER OF PARTNER AS AGENT OF PARTNERSHIP
Acts for carrying on in the usual way the business of the partnership 0&ery partner is an agent and may e#ecute acts with binding effect e&en if he has no authority 0#cept2 when 4rd person has )nowledge of lac) of authority Does not bind partnership unless authorized by other partners

!3 Act w1c is not apparently for the carrying of business in the usual way +. .cts of strict dominion or ownership/ a3 Assign partnership property in trust for creditors b3 c3 d3 e3 f3 Dispose of good'will of business Do an act w1c would ma)e it impossible to carry on ordinary business of partnership Confess a judgement 0nter into compromise concerning a partnership claim or liability (ubmit partnership claim or liability to arbitration

g3 Renounce claim of partnership Acts in contra&ention of a restriction on authority

%artnership not liable to 4rd persons ha&ing actual or presumpti&e )nowledge of the restrictions

EFFECTS OF PARTNERSHIP

CON-E.ANCE

OF

REAL

PROPERT.

BELONGING

TO

5itle in partnership name, Con0eyance passes title but partnership can reco0er if/ Con&eyance in partnership name !3 Con&eyance was not in the usual way of business, or .3 -uyer had )nowledge of lac) of authority 5itle in partnership name, Con0eyance does not pass title but only e1uitable interest2 unless/ Con&eyance in partner:s name

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!3 Con&eyance was not in the usual way of business, or .3 -uyer had )nowledge of lac) of authority 5itle in name of !1 more partners, Con0eyance passes title but partnership can reco0er if/ Con&eyance in name if partner1partners in whose name !3 Con&eyance was not in the usual way of business, or title stands .3 -uyer had )nowledge of lac) of authority 5itle in name of !1more1all partners Con&eyance will only pass e6uitable interest or 4rd person in trust for partnership, Con&eyance e#ecuted in partnership name of in name of partners 5itle in name of all partners, Con&eyance will pass title Con&eyance in name of all partners

PARTNER B. ESTOPPELA PARTNERSHIP B. ESTOPPEL P+,tne, '0 esto11e/ % by &ords or conduct, he does any o the ." 1. /irectly represents himself to anyone as a partner in an e%isting partnership or in a non5 e%isting partnership 2. ,ndirectly represents himself by consenting to another representing him as a partner in an e%isting partnership or in a non e%isting partnership E/e*ents to est+'/%s8 /%+'%/%t0 +s + 1+,tne, on 5,o&n3 o$ esto11e/: 1. /efendant represented himself as partner!represented by others as such and not denied!refuted by defendant 2. +laintiff relied on such representation 3. 1tatement of defendant not refuted L%+'%/%t%es %n esto11e/
All partners consented to representation No e#isting partnership ; all those represented consented7 Not all partners of e#isting partnership consents to representation No e#isting partnership ; not all represented consented7 None of partners in e#isting partnership consented %artnership is liable %erson who represented himself ; all those who made representation liable pro' rata1jointly %erson who represented himself liable ; those who made1consented to representation separately liable

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+. %$!PON!IBILI ( O" PA% N$%!#IP O PA% N$%! 1. To refund the amounts disbursed by partner in behalf of the partnership A corresponding interest from the time the e%penses are made $loans and advances made by a partner to the partnership aside from capital contribution& 2. To answer for obligations partner may have contracted in good faith in the interest of the partnership business 3. To answer for ris4s in conse*uence of its management DISSOLUTION AND WINDING UP DISSOLUTION 5 change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business< partnership is not terminated but continues until the winding up of partnership affairs is completed WINDING UP 5 process of settling the business or partnership affairs after dissolution CAUSES OF DISSOLUTION: 1. Without violation o the agreement bet&een the partners a. "y termination of the definite term! particular underta4ing specified in the agreement b. "y the e%press will of any partner, who must act in good faith, when no definite term or particular underta4ing is specified c. "y the e%press will of all the partners who have not assigned their interest! charged them for their separate debts, either before or after the termination of any specified term or particular underta4ing d. "y the e%pulsion of any partner from the business bonafide in accordance with power conferred by the agreement 2. ,n contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the e%press will of any partner at any time 3. "y any event which ma4es it unlawful for business to be carried on!for the members to carry it on for the partnership 4. Boss of specific thing promised by partner before its delivery

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5. /eath of any partner '. ,nsolvency of a partner!partnership 6. 3ivil interdiction of any partner 7. /ecree of court under art 1731 GROUNDS FOR DISSOLUTION B. DECREE OF COURT (+,t !B2!) 1. +artner declared insane in any judicial proceeding or shown to be of unsound mind 2. ,ncapacity of partner to perform his part of the partnership contract 3. +artner guilty of conduct prejudicial to business of partnership 4. =illful or persistent breach of partnership agreement or conduct which ma4es it reasonably impracticable to carry on partnership with him 5. "usiness can only be carried on at a loss '. .ther circumstances which render dissolution e*uitable 'pon application by purchaser o partner(s interest" 1. 2. fter termination of specified term!particular underta4ing nytime if partnership at will when interest was assigned!charging order issued

EFFECTS OF DISSOLUTION: A. A- #O%I ( O" PA% N$% O BIN+ PA% N$%!#IP Gene,+/ R&/e( uthority of partners to bind partnership is terminated E#)e1t%on: 1. =ind up partnership affairs 2. 3omplete transactions not finished <&+/%$%)+t%ons: !" W%t8 ,es1e)t to 1+,tne,s a. uthority of partners to bind partnership by new contract is immediately terminated when dissolution is not due to 3T, /2 T> or ,)1.B-2)3C $ /,& of a partner $art 1733&<

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b. ) due to *+), partners are liable as i partnership not dissolved, &hen the . concur" i. ,f cause is 3T of partner, acting partner must have 4nowledge of such dissolution ii. ,f cause is /2 T> or ,)1.B-2)3C, acting partner must have 4nowledge! notice 2" W%t8 ,es1e)t to 1e,sons not 1+,tne,s (+,t !B24) a. Partner continues to bind partnership even a ter dissolution in . cases" $1& Transactions in connection to winding up partnership affairs!completing transactions unfinished ,2- .ransactions &hich &ould bind partnership i not dissolved, &hen the other party/obligee" $a& 1ituation 1 5 i. >ad e%tended credit to partnership prior to dissolution @ ii. >ad no 4nowledge!notice of dissolution, or $b& 1ituation 2 5 i. /id not e%tend credit to partnership ii. >ad 4nown partnership prior to dissolution iii. >ad no 4nowledge!notice of dissolution!fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on b. Partner cannot bind the partnership anymore a ter dissolution" $1& =here dissolution is due to unlawfulness to carry on with business $e%cept( winding up of partnership affairs& $2& =here partner has become insolvent ,3- Where partner unauthori/ed to &ind up partnership a airs, e!cept by transaction &ith one &ho" $a& 1ituation 1 5 i. >ad e%tended credit to partnership prior to dissolution @ ii. >ad no 4nowledge!notice of dissolution, or $b& 1ituation 2 5 i. /id not e%tend credit to partnership prior to dissolution

15

ii. >ad 4nown partnership prior to dissolution iii. >ad no 4nowledge!notice of dissolution!fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on B. +I!)#A%G$ O" LIABILI ( D +issolution does not discharge e!isting liability o partner, e!cept by agreement bet&een" $1& partner himself $2& person!partnership continuing the business $3& partnership creditors R%58ts o$ 1+,tne, =8e,e 3%sso/&t%on not %n )ont,+>ent%on o$ +5,ee*ent 1. 2. pply partnership property to discharge liabilities of partnership pply surplus, if any to pay in cash the net amount owed to partners

R%58ts o$ 1+,tne, =8e,e 3%sso/&t%on %n )ont,+>ent%on o$ +5,ee*ent 1. Partner &ho did not cause dissolution &rong ully" a. b. pply partnership property to discharge liabilities of partnership pply surplus, if any to pay in cash the net amount owed to partners

c. ,ndemnity for damages caused by partner guilty of wrongful dissolution d. 3ontinue business in same name during agreed term e. +osses partnership property if business is continued 2. Partner &ho &rongly caused dissolution" a. ) business not continued by others 5 apply partnership property to discharge liabilities of partnership @ receive in cash his share of surplus less damages caused by his wrongful dissolution b. ) business continued by others 5 have the value of his interest at time of dissolution ascertained and paid in cash!secured by bond @ be released from all e%isting!future partnership liabilities

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R%58ts o$ %n(&,e3 1+,tne, =8e,e 1+,tne,s8%1 )ont,+)t %s ,es)%n3e3 on 5,o&n3 o$ $,+&3C*%s,e1,esent+t%on '0 ! 1+,t0: 1. ;ight to lien on surplus of partnership property after satisfying partnership liabilities 2. ;ight to subrogation in place of creditors after payment of partnership liabilities 3. ;ight of indemnification by guilty partner against all partnership debts @ liabilities ). !$ L$&$N O" A))O-N ! B$ *$$N PA% N$%!

Assets o$ t8e 1+,tne,s8%1: 1. +artnership property $including goodwill& 2. 3ontributions of the partners O,3e, o$ A11/%)+t%on o$ Assets: 1. +artnership creditors 2. +artners as creditors 3. +artners as investors 5 return of capital contribution 4. +artners as investors 5 share of profits if any +. *#$N B-!IN$!! O" +I!!OL'$+ PA% N$%!#IP I! )ON IN-$+: 1. 3reditors of old partnership are also creditors of the new partnership which continues the business of the old one w!o li*uidation of the partnership affairs 2. 3reditors have an e*uitable lien on the consideration paid to the retiring !deceased partner by the purchaser when retiring!deceased partner sold his interest w!o final settlement with creditors 3. 0ights i retiring/estate o deceased partner" a. To have the value of his interest ascertained as of the date of dissolution b. To receive as ordinary creditor the value of his share in the dissolved partnership with interest or profits attributable to use of his right, at his option

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R%58t to A))o&nt 5 may be e!ercised by" 1. =inding up partner 2. 1urviving partner 3. +erson!partnership continuing the business M+nne, o$ W%n3%n5 U1 1. Eudicially 2. 2%trajudicially Pe,sons A&t8o,%De3 to W%n3 U1 1. +artners designated by the agreement 2. ,n absence of agreement, all partners who have not wrongfully dissolved the partnership 3. Begal representative of last surviving partner LIMITED PARTNERSHIP CHARACTERISTICS 1. Formed by compliance with statutory re*uirements 2. .ne or more general partners control the business 3. .ne or more general partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond their capital contributions 4. 0ay as4 for the return of their capital contributions under conditions prescribed by law 5. +artnership debts are paid out of common fund and the individual properties of general partners

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DIFFERENCES BETWEEN GENERAL AND LIM%TED PARTNERCPARTNERSHIP

GENERAL %ersonally liable for partnership obligations =hen manner of mgt3 not agreed upon, all gen partners ha&e an e6ual right in the mgt3 of the business Contribute cash, property or industry %roper party to proceedings by1against partnership nterest not assignable w1o consent of other partners Name may appear in firm name %rohibition against engaging in business Retirement, death, insol&ency, insanity of gen partner dissol&es partnership LIMITED <iability e#tends only to his capital contributions No participation in management Contribute cash or property only, not industry Not proper party to proceedings by1against partnership nterest is freely assignable Name must appear in firm name No prohibition against engaging in business Does not ha&e same effect7 rights transferred to legal representati&e

RE<UIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP 1. 1erti icate o articles o the limited partnership must state the . matters" a. )ame of partnership A word Gltd.G b. 3haracter of business c. Bocation of principal place of business d. )ame!place of residence of members e. Term for partnership is to e%ist f. mount of cash!value of property contributed g. dditional contributions h. Time agreed upon to return contribution of limited partner i. 1haring of profits!other compensation j. ;ight of limited partner $if given& to substitute an assignee 4. ;ight to admit additional partners l. ;ight of limited partners $if given& to priority for contributions m. ;ight of remaining gen partners $if given& or continue business in case of death, insanity, retirement, civil interdiction, insolvency n. ;ight of limited partner $if given& to demand!receive property!cash in return for contribution 2. 3ertificate must be filed with the 123 WHEN GENERAL PARTNER NEEDS CONSENTCRATIFICATION OF ALL LTD PARTNERS: 1. /o any act in contravention of the certificate 2. /o any act which would ma4e it impossible to carry on the ordinary business of the partnership 3. 3onfess judgement against partnership

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4. +ossess partnership property!assign rights in specific partnership property other than for partnership purposes 5. '. dmit person as general partner dmit person as limited partner 5 unless authori#ed in certificate

6. 3ontinue business with partnership property on death, retirement, civil interdiction, insanity or insolvency of gen partner unless authori#ed in certificate SPECIFIC RIGHTS OF LIMITED PARTNERS: 1. ;ight to have partnership boo4s 4ept at principal place of business 2. ;ight to inspect!copy boo4s at reasonable hour 3. ;ight to have on demand true and full info of all things affecting partnership 4. ;ight to have formal account of partnership affairs whenever circumstances render it just and reasonable 5. ;ight to as4 for dissolution and winding up by decree of court '. ;ight to receive share of profits!other compensation by way of income 6. ;ight to receive return of contributions provided the partnership assets are in e%cess of all its liabilities LOAN AND OTHER BUSINESS TRANSACTIONS WITH LIMITED PARTNERSHIP 1. *llo&ed a. Hranting loans to partnership b. Transacting business with partnership c. ;eceiving pro rata share of partnership assets with general creditors if he is not also a general partner 2. +rohibited a. ;eceiving!holding partnership property as collateral security b. ;eceiving any payment, conveyance, release from liability if it will prejudice right of 3rd persons

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RE<UITES FOR RETURN OF CONTRIBUTION OF LIMITED PARTNER: 1. ll liabilities of partnership have been paid!if not yet paid, at least sufficient to cover them 2. 3onsent of all members has been obtained 3. 3ertificate is cancelled!amended as to set forth withdrawal !reduction of contribution LIABILIT. OF LIMITED PARTNER
AS CREDITOR !3 Deficiency in contribution .3 9npaid contribution AS TRUSTEE (pecific property stated as contributed but not yet contributed1wrongfully returned ,oney1other property wrongfully paid1 con&eyed to him on account of his contribution

DISSOLUTION OF LIMITED PARTNERSHIP P,%o,%t0 %n D%st,%'&t%on o$ Assets: 1. Those due to creditors, including limited partners 2. Those due to limited partners in respect of their share in profits!compensation 3. Those due to limited partners of return of capital contributed 4. Those due to general partner other than capital @ profits 5. Those due to general partner in respect to profits '. Those due to general partner for return of capital contributed AMENDMENTCCANCELLATION OF CERTIFICATE C+n)e//e3: 1. +artnership is dissolved other than by reason of e%piry of term 2. ll limited partners cease to be such

A*en3e3: 1. 3hange in name of partnership, amount!character of contribution of ltd. partner 2. 1ubstitution of ltd. partner 3. 4. dmission of additional ltd. partner dmission of gen. partner

5. /eath, insolvency, insanity, civil interdiction of gen. partner @ business is continued

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'. 3hange in character of business 6. False!erroneous statement in certificate 7. 3hange in time as stated in the certificate for dissolution of partnership!return of contribution 8. Time is fi%ed for dissolution of partnership. ;eturn of contribution if no orig. time specified 19. 3hange in other statement in certificate

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