CHAPTER 4
LIMITED PARTNERSHIP
ARTICLE 1843
A limited partnership is one formed by two or
more persons under the provisions of the
following article, having as members one or
more general partners and one or more
limited partners. The limited partners as
such shall not be bound by the obligations of
the partnership.
➔ At least 1 general and 1 limited partner
◆ Limited partners are limited to
the fixed amount only
◆ Not liable to outside partners
◆ No prohibition na magengage
sa kahit anong business
◆ Seen as an investor, contributor
➔ The reason for the existence of a limited
partnership is to address the needs of
all those who wish to join a partnership
without the risk of losing any personal
property.
➔ Limited liability - key characteristics
CHARACTERISTICS OF A LIMITED
PARTNERSHIP
1. Formed by compliance in good faith with
the statutory requirements
2. One or more general partners control
the business and are personally liable to
creditors
3. One or more limited partners (special
partners) contribute to the capital and
share in the profits but do not participate
in the management of the business
4. Limited partners are not liable to the
partnership obligation beyond their
capital contributions
5. Limited partners may ask for the return
of their capital contributions
6. Partnership debts are paid out of the
common fund and the separate
properties of the general partners
➔ Their limited liability is an exception to
the general rule that all partners,
including industrial partners, are liable
pro rata with all their property for
partnership debts. (Art. 1816.)
BUSINESS REASON AND PURPOSE OF
STATUTES AUTHORIZING LIMITED
PARTNERSHIP
● Secure capital from others for one’s
business and still retain control.
● Share in profits of a business without
risk of personal liability
● Associate as partners with those having
business skill
ARTICLE 1844
Two or more persons desiring to form a
limited partnership shall:
1. Sign and swear to a certificate, which
shall state -
a. The name of the partnership,
adding thereto the word
"Limited";
b. The character of the
business;
c. The location of the principal
place of business;
d. The name and place of
residence of each member,
general and limited partners
being respectively
designated;
e. The term for which the
partnership is to exist;
f. The amount of cash and a
description of and the agreed
value of the other property
contributed by each limited
partner;
g. The additional contributions,
if any, to be made by each
limited partner and the times
at which or events on the
happening of which they shall
be made;
h. The time, if agreed upon,
when the contribution of each
limited partner is to be
returned;
i. The share of the profits or the
other compensation by way of
income which each limited
partner shall receive by
reason of his contribution;
j. The right, if given, of a limited
partner to substitute an
assignee as contributor in his
place, and the terms and
conditions of the substitution;
k. The right, if given, of the
partners to admit additional
limited partners;
l. The right, if given, of one or
more of the limited partners
to priority over other limited
partners, as to contributions
or as to compensation by way
of income, and the nature of
such priority;
m. The right, if given, of the
remaining general partner or
partners to continue the
business on the death,
retirement, civil interdiction,
insanity or insolvency of a
general partner; and
n. The right, if given, of a limited
partner to demand and
receive property other than
cash in return for his
contribution.
2. File for record the certificate in the Office
of the Securities and Exchange Commission
A limited partnership is formed if there has
been substantial compliance in good faith
with the foregoing requirements.
➔ So that public notice may be given to all
who desire to know the essential
features of the partnership.
➔ A limited partnership is formed if there
has been substantial compliance in
good faith with the requirements set
forth in Article 1844.
➔ A strict compliance with the legal
requirements is not necessary. It is
sufficient that there is substantial
compliance in good faith.
➔ If there is no substantial compliance, the
partnership becomes a general
partnership as far as third persons are
concerned, in which all the members are
liable as general partners. otherwise,
the liability of the limited partners
becomes the same as that of general
partners.
❖ The purpose of requiring the filing of the
certificate is to give actual or
constructive notice to potential creditors
or persons dealing with the partnership
❖ Certificate of a limited partnership -
This document, as a rule, must contain
the matters enumerated in said article.
Thus, a limited partnership cannot be
constituted orally.
Limited partnership not created by mere
voluntary agreement
➔ As we know sa formation ng general
partnership oral lang pwede na,
nagkakaron lang ng additional
requirements kapag may contribution ng
property or 3,000 and above yung
 capital, pero those are just procedural
requirements.
➔ Pagdating sa limited partnership, medyo
strikto na yung batas
Requirements of the statutes must be followed
so that public notice may be given to all who
desire to know the essential features of the
partnership
➔ By filing it to the SEC, You are informing
the public that this partnership is a
limited partnership.
➔ Bakit need maging aware ng public sa
existence na limited yung partnership?
Because of the limited liability conferred
to limited partners, na di pwede habulin
yung personal properties nito.
➔ Informing the public is for the protection
of third persons, outside creditors
Substantial compliance in good faith
➔ Kapag di sinunod yung compliance in
good faith, then magiging general
partnership na lang siya.
➔ Kaya mahalaga na sundin yung
statutory requirements provided by the
law.
ARTICLE 1845
The contributions of a limited partner may be
cash or property, but not services.
➔ Limited partners can only contribute
cash or other property, not services
because if he does so, then he shall
become a GENERAL INDUSTRIAL
PARTNER. in which case, he shall not
be exempted from personal liability.
➔ Contribution must be given immediately.
If he has promised additional
contribution, then it should be given on
the date promised or agreed upon.
➔ This is to protect persons dealing with
the firms with frauds.
ARTICLE 1846
The surname of a limited partner shall not
appear in the partnership name unless:
1. It is also the surname of a general
partner
2. Prior to the time when the limited
partner became such, the business
had been carried on under a name in
which his surname appeared
A limited partner whose surname appears in
a partnership name contrary to the
provisions of the first paragraph is liable as a
general partner to partnership creditors who
extend credit to the partnership without
actual knowledge that he is not a general
partner.
➔ The surname of the limited partner
should not appear except if it is also the
surname of a general partner or if at the
time of his admission, it was already
being used.
➔ If the limited partner allows that his
surname be used, then he shall be held
liable as a general partner as to 3rd
persons who extended credit not
knowing he was a limited partner.
➔ If the creditor has knowledge of his
being a limited partner, then this rule
shall not apply.
Article 1847
If the certificate contains a false statement,
one who suffers loss by reliance on such
statement may hold liable any party to the
certificate who knew the statement to be
false:
1. At the time he signed the certificate
2. Subsequently, but within a sufficient
time before the statement was relied
upon to enable him to cancel or
amend the certificate, or to file a
petition for its cancellation or
amendment as provided in Article
1865.
➔ If there are false statements in the
certification and 3rd persons should
suffer loss due to these, then he can
hold liable all those who had knowledge
of the false statement at the time
certification was signed.
➔ The same shall apply if the partners
concerned had sufficient time to have
 the certificate canceled but did not do
so.
LIABILITY FOR FALSE STATEMENT IN
CERTIFICATE

The one who suffers loss by reliance on such

false statements may hold liable any party in the
certificate of limited partnership who is in bad
faith.

1. Requisites
a. The partner knew the statement to be
false at the time he signed the
certificate, or subsequently, but having
sufficient time to cancel or amend it or
file a petition for cancellation or
amendment, he failed to do so.

At the time na finile yung certificate alam mo

ng may false statement, then you are liable

At the time na finile yung certificate hindi

alam mo na may false statement, but later
on nalaman mo na may false statement pero
wala kang ginawa, hinayaan mo lang,
kumbaga may negligence

b. The person seeking to enforce the

liability has relied upon the false
statement in transacting business with
the partnership
c. The person suffered loss as a result of
reliance upon such false statement

2. Nature of liability - Yung guilty partner is

hindi necessarily magiging liable as a general
partner, merely statutory penalty, no conversion
of limited partner to general