Republic of the Philippines

SORSOGON STATE COLLEGE

Bulan Campus
Bulan, Sorsogon

Partnership and Corporation

Schedule: N/A

Lesson No: 1

Key Concepts:

 Partnership Defined

 Partnership is a contract of two or more persons who bind themselves to

contribute money, property, or industry to a common fund, with the intention of
dividing profits among themselves. Two or more persons may also form a
partnership for the exercise of a profession. (Art. 1767)

 A partnership is a juridical entity which has a personality separate and distinct

from that of each of the partners (Art. 1768). It begins from the moment of the
execution of the contract, unless otherwise stipulated (Art. 1784).

 Characteristics of a Partnership Contract (CP-BP-ON)

 Consensual- it is perfected by the consent of the parties/partners.

 Principal- it does not depend on any other contract for it to validly exist. It can
stand on its own.
 Bilateral- it is entered into by two or more persons having reciprocal rights and
obligations
 Preparatory- it is a means by which other contracts will be entered into as the
partnership pursues its business.
 Onerous- the contract is for a consideration (money, property, industry).
 Nominate- it has a special name given to it by law.

 Essential Requisites of Partnership

  Valid Contract- there must be voluntary agreement in order for a partnership to
validly exist. Partners have a fiduciary relationship with one another and run on
the principle of delectus personae which means a partner is free to choose those
that he wants to be associated with in partnership.

 Mutual Contribution- partners must contribute money, property or industry

(Art. 1767). The property may be real or personal tangible or intangible. Industry
may be physical manual efforts or intellectual industry.

 Lawful Object- a partnership with unlawful object is void. In case of a crime due
to the illegality of the object, the parners will be criminally liable and the profits
and effects will be confiscated in favor of the Government. (Art. 1770, Art 45
RPC)

 Earn Profit and Divide among Themselves- The partnership must be established
for the common benefit or interest of the partners which is to obtain profits and
to divide the profit among the partners (Art. 1768). However, if the partnership
is formed for the practice of profession, the purpose must not be for profit but
to serve the public.

 Form of Partnership Contract

 General Rule: A partnership may be constituted in any form either oral or

written.
 Exception:
1) Where immovable property or real rights are contributed into the
partnership.
a) The partnership contract must be in a public instrument.
b) An inventory of the said property must be made signed by the parties and
attached to the public instrument.

*If the above formalities are not met, the partnership is void and will not
have juridical personality.
2) Where the capital of the partnership is P3, 000.00 or more in money or
property.
a) The partnership must be in public instrument.
b) The partnership must be registered with Securities and Exchange
Comission.
 *If the above formalities are not met, the partnership is still valid and the
partnership will still have juridical personality.
3) Where the partnership is a limited partnership, a certificate under oath
signed by the partners and recorded with the SEC is required.
* If the above formality is not met, the partnership will be considered as a
general partnership.
 Who May Become Partners

 Any natural person who is capacitated may become a partner.

 Artificial persons or juridical entities like partnerships and corporations may

become partners. A joint venture is a form of partnership which is entered into
by 2 or more corporations for a specific undertaking.

 Rules to Determine Existence of Partnership

 Persons who are not partners as to each other are not partners as to third
persons.
 Co-ownership or co-possession does not of itself establish a partnership,
whether such-co-owners or co-possessors do or do not share any profits made
by the use of the property.
 The sharing of gross returns does not of itself establish a partnership, whether or
not the persons sharing them have a joint or common right or interest in any
property from which the returns are derived
 The receipt by a person of a share of the profits of a business is prima facie
evidence that he is a partner in the business,
Exception: No such inference shall be drawn if such profits were received in
payment:
a) As a debt by installments or otherwise;
b) As wages of an employee or rent to a landlord;
c) As an annuity to a widow or representative of a deceased partner;
d) As interest on a loan, though the amount of payment vary with the profits of
the business;

References:
Prepared by

Name: Dominic Jason F. De Jesus

Position/Rank: Instructor 1
Institution: Sorsogon State College, Bulan Campus
Institution’s Address: Bulan, Sorsogon
Personal e-mail address: dejesusdj04@gmail.com
Personal mobile phone number: 0917 153 4102