Rules on Division of Profits and Losses

1. If all are capitalist partners

a. profits and losses shall be divided according to their agreement.
b. If only the sharing of the partners in the profits has been agreed upon, the share of
each partner in the losses shall be in the same proportion as the share of each in the
profits.
c. In the absence of any agreement, the share of each partner in the profits and losses
shall be in proportion to his capital contribution.

2. If aside from the capitalist partners, there is also an industrial partner (or there are
industrial partners).

A – Profits
a. the profits shall be divided according to their agreement.
b. In the absence of any agreement thereon, the industrial partner shall first receive a
just and equitable share of the profits, and thereafter, each capitalist partner shall share
in the profits in proportion to his capital contribution.

B – Losses
(a) the industrial partner shall not share in the losses unless there is agreement.(NOTE:
The agreement as to losses must be express, clear and categorical.)
(b) the capitalist partners shall share in the losses as follows:
according to their agreement.
In the absence of any agreement thereon, each capitalist partner shall share in the
losses in proportion to his capital contribution.

3. If aside from capitalist partners, there is also a capitalist–industrial partner (or there
are capitalist-industrial partners)

A – Profits
(1) the profits shall be divided according to their agreement.
(2) In the absence of any agreement, profits shall be divided as follows:
 (a) the capitalist-industrial partner shall first receive a just and equitable share of
the profits in his capacity as industrial partner;
(b) Thereafter, each capitalist partner, including the capitalist-industrial partner in
his capacity as capitalist partner, shall share in the profits in proportion to his
capital contribution.

B – Losses
(1) losses shall be divided among the partners, including the capitalist-industrial
partner in his capacity as capitalist partner, according to their agreement.
(2) In the absence of any agreement thereon, losses shall be divided among the
partners including the capitalist-industrial partner, according to the ratio of their
capital contribution.
(3) In both of the above cases, the capitalist-industrial partner shall not share in the
losses in his capacity as industrial partner.
NOTE: Any stipulation which excludes one or more partners from any share in the
profits and losses is void (Art. 1799) except one which exempts an industrial partner
from losses because the law provides that he shall not be liable therefor (Art. 1797).
(BUT IF THERE IS AGREEMENT THAT AN INDUSTRIAL PARTNER MAY
VOLUNTARILY SHARE IN THE LOSSES, THEN IT SHALL BE RESPECTED).
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CASE: A, B, C and D are capitalist partners in a Limited Partnership with P1M capital
whereby only D is the limited partner. To constitute the capital, A contributed P500T, B
contributed P300T, C is P100T and D is also P100T.
QUESTION: If the partnership earned a clean profit of P600T, how much will be the
share of each partner in the said profit?
ANSWER: A gets P300T (50% of P600T)
B gets P180T (30% of P600T)
C gets P 60T (10% of P600T)
D gets P 60T (10% of P600T)
COMPUTATION:
CAPITAL: P1M (No Agreement) NET PROFIT: P600T
A = (500T / 1M = 50%) (600T x .50 = 300T)
B = (300T / 1M = 30%) (600T x .30 = 180T)
C = (100T / 1M = 10%) (600T x .10 = 60T)
D = (100T / 1M = 10%) (600T x .10 = 60T)
Therefore:
A gets P300T (50% of P600T)
B gets P180T (30% of P600T
C gets P60T (10% of P600T)
D gets P60T (10% of P600T)
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CASE: A, B, C and D are capitalist partners in a Limited Partnership with P1M capital
whereby only D is the limited partner. To constitute the capital, A contributed P500T, B
contributed P300T, C is P100T and D is also P100T.
QUESTION: Assuming that the partnership has incurred net losses of P800T, how
much will be the share of each partner in the said loss after all assets have been
exhausted?
ANSWER: A shares P444,480.00 (55.56% of P800T)
B shares P266,640.00 (33.33% of P800T)
C shares P 88,880.00 (11.11% of P800T)
D shares 0 because he is a limited partner.
COMPUTATION:
CAPITAL: P1M (No Agreement) NET LOSS: P800T
(-100T) (share of D)
A = (500T / 900T = 55.56%) (800T x .5556 = 444,480
B = (300T / 900T = 33.33%) (800T x .3333 = 266,640)
C = (100T / 900T = 11.11%) (800T x .1111 = 88,880)
D = exclude (limited)
Therefore:
A shares P444,480.00 (55.56% of P800T)
B shares P266,640.00 (33.33% of P800T)
C shares P 88,880.00 (11.11% of P800T)
D shares 0 because he is a limited partner.