PARTNERSHIP
Liability
- is an organization where two or more persons
bind themselves to contribute money, property
or industry.
- Divided profits among themselves
2 kinds of contracts
- Oral
- Writing (Document/ Agreement; also serves as
evidence that there is a partnership)
Note: if it is worth 3,000 or more or there is a
real property involved. It must be in writing
Example of Partnership:
A – Has a Car
B – Has a computer
The assets or properties they invested in
partnership becomes a “Joint Property” of all
partners.
So it does becomes a “Partnership property”
The partners are the Co-Owners of the
partnership property.
It means that, they both have the right to use
their assets but its purpose must be in business
and not personal. (For further study see in the
Gclassroom; Partnership 2: Role of Partners)
Unlimited Liability
- will go beyond the property of partnership, can
even go extend.
- If there is debt/liability, and the partnership
does not have enough money to pay for the
liability. The creditor/s can go with the personal
assets of partner.
“The fault of one is the fault of all”
- There are unlimited liabilities.
of one is liabilities of all.
- Partners are considered as agents of
Partnership.
- Bound by acts by any of the partners.
(For further study see in the Gclassroom;
Partnership 2: Role of Partner)
Kinds of Partnership
1. As to liability
General Partnership
(Asset = Liabilities + Capital)
- All the partners are general partners, and
liable with unlimited liabilities.
Insolvent partner – has no more assets to pay
its liability. Not able to pay all his/her liabilities.
In that case, the creditors will run or go to the
personal assets of partners.
Solvent partner – has enough assets; and able
to pay his/her liabilities.
Example:
Joint Partnership - partners A, B, and C, each
of them is liable to pay 10,000 pesos to specific
creditor/s.
Solidary Partnership – A, B and C are
partners. They have a debt/liabilities to pay to a
specific creditor. The creditor/s go with A and
asking for the payment for 30,000. A, will now
pay all 30,000 pesos but his share is only 10,000
pesos, but since they are a Solidary Partnership,
it means he is liable to pay all the 30,000. After
he pay all the 30,000 pesos. He is now the new
creditor and he can reimburse to B and C.
Limited Partnership
- Extend only in the investment to
partnership. If there is a liabilities sa
partnership at naubos na yung
contributions nya hindi sya pwedeng
habulin ng creditor/s. Because, it is said
that he can only pay up to the extent of
his contributions to the partnership.
2. As to Property
Universal Partnership of Property
- All of his/her properties are contributed into a
common funds.
- Commonly used.
Universal Partnership of Profits
- Partners will contribute profits or income, they
will received by partnership.
Kinds of Partners
1. General Partner
- The one who manage the partnership.
Contribute properties or service and has
unlimited liability
Limited Partner
- invest cash or property and has no unlimited
liability.
- No active role in the management of
partnership.
2. Capitalist Partner
- contribute money or property into the
partnership
Industrial Partner
- The one who contributes industry or service
only.
- No contribution of property or cash.
3. Real Partner
- The actual partners
Nominal partner
- Partner in name only
Example:
Due to the popularity of A. B and C are partners
and decided to pay the name of A, they have an
agreement and after that their partnership will
be known in public. Since A is quite popular.
4. Ostensible partner
- known in the public that he is a partner
Secret partner – not know as such to the public.
He/she may remain unknown. But still a partner
of the partnership
Example: A, B, and C are partners also D, but D
on the other hand does not belong, but he is still
a partner of partnership of A, B, and C.
5. Universal Partner
- Participation extends to the entire business
Particular partner
- The one whose limited to a unit or part of a
business
Take note that all industrial partner is also a
general partner, with unlimited liability and is
not allowed to engage in any other kind of
business unless expressly authorized by the
other partner.
PARTNERSHIP CONTRACT
- Agreement concerning formation, operation,
dissolution and liquidation of the partnership
embodied in a contract called Articles of Co-
Partnership.
- Verbal agreement is VALID, but is advisable
to put it in Writing as conflicts and
disagreements may easily arise because of
numbers of persons involved.
- Contract will act as form of governance of
partnership activities and will clearly reflect the
relationships of the partners among each other
and with third parties.
- Partnership must be registered to Securities
and Exchange Commission (SEC)
- Contract must be in public instrument and
notarized by the Public Notary. Because it
serves as notice to the whole world, it means
that the partnership/contract is existing. And it is
binding on third-person.
If the contract does not notarize, it is only valid
to the contracting partners and not valid to third
person.
Dissolution – ito ay bilang ng partner, if ever na
may ida-dagdag na bagong partner or may
mababawas. Magkakaron ng changes mad-
dissolve na yung lumang partnership due to
changes of partners.at magkakaron ng bagon
partnership.
Articles of Co-Partnership
(Content of Contract)
1. Name of Partnership
2. Principal place of business
3. Date of effectiveness and life of the
partnership
4. Purpose of the partnership
5. Names, Addresses, and contributions of the
partners
6. Manner of the management of the partnership
7. Manner of dividing the profits among the
partners
8. Periodic withdrawals allowed for a partner
9. Manner of liquidating the partnership with the
rights and duties of the partners
10. Arbitration of Disputes
Note: It is also important na may logo ang
partnership. And when it comes to sole
proprietorship kahit picture nalang.
DIFFERENCE BETWEEN A
PARTNERSHIP AND A CORPORATION
- Corporation may exist for more than a Century
(not more than 50 yrs.) and can have another 50
yrs. For extension. So basically a corporation
will last until 100 yrs.
- When it comes to requirements, corporations
are very strict, and complicated.
- Shareholders have a limited liability and they
are not personally liable.
Example:
San Miguel Beer Corporation
It does still exist for more than a hundred years
but the law will not take effect in this
corporation, hindi pwedeng i-apply ang bata sa
korporasyong ito, dahil this corporation already
exist before the law. “No Ex post facto law” No
Retroactive effect.
Except in favor of the excuse
Example:
Robin Padilla (an ex-convict)
Sentence for 20 yrs. in prison for bringing illegal
fire arms. But the former Senator Revilla pass a
law that the sentence for bringing illegal fire
arms should be 3yrs only. And since Robin
Padilla already served 5 yrs. in prison he has
been released from prison. Because he already
surpass the 3 yrs. Imprisonment.
While partnership has an indefinite life but may
be dissolved and liquidated with the unanimous
consent of all partners. And partners are
personally liable to creditors.
It is easy to dissolve a partnership with death,
incapacity, or insolvency of anyone partners.
The advantage of a partnership over a
corporation: Ease in information, lesser legal
requirements, Accessibility to record, and active
management.
Disadvantage of a partnership over a
corporation: Difficult to transfer and or increase
ownership as it requires unanimous consent of
all partners whereas shareholders may transfer
their shares easily.
BUSINESS ENTITY CONCEPT
- emphasizes the view that a business unit such
as partnership, sole proprietorship or a
corporation should be treated as a distinct and
separate from the owner, partners or
shareholders.
Proprietary theory
- emphasizes the view of the individual partners
as owners of the net assets of the business
especially when salaries are given to them, or
when obligation to partnership creditors extend
to their personal properties, or when the original
partnership is dissolved and the consent of the
partners are required in admitting a new partner.
Accounting for Partnership
- The accountant must have sufficient
knowledge of the legal provisions
regarding a partnership as these would
affect certain aspects of partnership,
accounting such as investments of the
partners, dissolutions of the partnership,
distribution of profit or loss to the
partners and liquidation of the
partnership.

RIGHTS OF A PARTNER
1. A partner has a right over specific partnership
property.
2. A partner has a right to share in the profits
resulting from business operation.
3. A partner has a right to share in the remaining
assets upon partnership liquidation after the
partnership creditors have been paid.
4. A partner has a right to co-manage the
partnership.
5. A partner has a right to ask that the books be
kept in the principal place of business subject to
inspection at a reasonable time.