 Different Essential Elements of Partnership

 Existence of a Valid Contract- The partners have come to agreement to established a

partnership that will be known as the Caffè Avenue Partnership. To participate in the
activities described in the following terms and conditions, the partnership has been
established. The partnership must have a signed contract that binds all of the partners.
 Legal Capacity of Parties to Enter into the Contract- A contract of partnership can only
be entered into by those who are legally able and competent to engage into contracts.
 Mutual Contribution to a Common Fund- The partners agreed to contribute based on
their cash investments, intellectual property and skills and labor they commit to
business operations at the outset of the partnership.
 Legality of Object- Only activities that are sanctioned by the law can be engaged in by
the partners. Any illegal behavior that is carried out by partners is not protected by the
law and will not receive legal penalty.
 Intention to Realize and Divide Profit- This key component states that the agreement to
do business must have the goal of sharing profits among all participants. The manner in
which earnings and losses will be divided should be clearly outlined in the partnership
agreement.

 Contributions of Partners
Each of the Partners has contributed to the capital of the partnership, in cash, land, building,
equipment and furniture and fixtures in agreed upon value, as follows:

Contribution Ms. Mejia Ms. Ms. Bejar Mr. Ms. Partnership

Hermoso Antonio Carnate
Cash 200,000 150,000 300,000 200,000 100,000 950,000
Land 1,000,000 1,000,000
Building 500,000 500,000
Equipment 250,000 8,000 300,000 350,000 300,000 1,200,000
Furniture 30,000 25,000 20,000 20,000 20,000 115,000
and Fixtures
TOTAL 480,000 1,675,000 620,000 570,000 420,000 3,765,000

The partnership business is funded by five major sources: Partner Investments. Ms. Mejia
contributed P480,000, Ms. Hermoso contributed P1,675,000, Ms. Bejar contributed P620,000,
Mr. Antonio contributed P570,000, and Ms. Carnate contributed P420,000, which bring a total
partnership investment of P3,765,000.
 Organizational Structure

Financial Manager Ms. Jheda Hermoso

Ms. Christine Lou

Marketing Manager
Pearl Bejar
Ms. Melanie Mejia
(Caffè Avenue
General Manager)
Mr. Kenneth
Sales Manager
Antonio

Ms. Nice Richelle

Production Manager
Karyll Faith Carnate

 Type of Partners, Roles and Responsibilities

Each of the Partners has equal rights in the management of the Partnership. The partners will
each commit to devoting as much of their time and energy as is required to the business of the
partnership in order to ensure that the partnership is successful in achieving its goals.

NAME TYPE OF ROLES RESPONSIBILITIES

PARTNERS
The coffee store manager is
responsible for various aspects of
Ms. Melanie Capitalist, Coffee Store the company, including but not
Mejia General, General Manager limited to managing workers,
Managing controlling the budget,
Partner implementing marketing initiatives,
and many more facets of the
business.
A company’s ability to receive
Capitalist, financial advise and support is
Ms. Jheda General, Financial significantly impacted by the
Hermoso Managing Manager performance of its financial
Partner manager. It conducts research on
the topic, among other things like
monitoring cash flow.
The marketing manager is
Ms. Christine Lou Capitalist, Marketing responsible for promoting and
Pearl Bejar General, Manager positioning a brand in addition to
Managing the products and services that are
Partner sold by the company.
Capitalist, The responsibility for ensuring the
 Mr. Kenneth General, Sales Manager sales goals are attained rests on the
Antonio Managing sales manager.
Partner
The production manager is
Ms. Nice Richelle Capitalist, Production responsible for supervising the
Karyll Carnate General, Manager production process and organizing
Managing all activities and operations related
Partner to production.

 Capitalist Partner- a partner who contributes money to the capital of the company.
 General Partner- a part owner of a partnership business and is involved with its
operations and shares in profits.
 Managing Partner- is responsible for the day-to-day management of the partnership
business.

 Profit and Loss Sharing Scheme

The profit or losses will be allocated in accordance with the agreement of the partnership.

NAME OF THE PARTNER TOTAL CONTRIBUTION PERCENTAGE

Ms. Mejia 480,000 13%
Ms. Hermoso 1,675,000 45%
Ms. Bejar 620,000 16%
Mr. Antonio 570,000 15%
Ms. Carnate 420,000 11%
Total 3,765,000 100%

The partnership agreed that the distribution of profits and losses shall divided based on capital
contributions.

 Scenario
On the month of March 2021, Mr. Antonio received an offer from Ms. Carpio to directly
purchased 25% of her interest in the partnership of P145,000. Ms. Carpio is a successful young
entrepreneur. Thus, continuing partners agree to admit Ms. Carpio as a member of the firm.

Mr. Antonio, Capital 142,000

Ms. Carpio, Capital 142,000

Computation: 570,000 x 25% = 142,000

The new partner received a one-fourth transfer of Mr. Antonio’s capital. The partnership did not
receive the cash paid because the transaction is between Mr. Antonio and Ms. Carpio
personally, not between Ms. Carpio and the partnership.