Page 1 of 3

UNIVERSITY OF THE CORDILLERAS COLLEGE OF ACCOUNTANCY NATURE OF PARTNERSHIP BUSINESS LECTURE AID STUDY OUTLINE I. DEFINITION OF PARTNERSHIP II. MAJOR CHARACTERISTICS OF A PARTNERSHIP III. ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP IV. KINDS OF PARTNERSHIP V. KINDS OF PARTNERS I. DEFINITION OF PARTNERSHIP By the contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession (Civil Code of the Philippines, Art. 1767) II. MAJOR CHARACTERISTICS OF A PARTNERSHIP (I ACE CULAM) Income participation Association of individuals Based on contract Ease of formation Co-ownership Unlimited liability Limited life Assignment of interest Mutual agency

1. 2. 3. 4. 5. 6. 7. 8. 9.

III. ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP Advantages (JETLeg) 1. Joint Resources 2. Easy Formation 3. Tax exemption 4. Less Government Supervision Disadvantages (CLUM) 1. Consensual 2. Limited life 3. Unlimited liability 4. Mutual agency IV. KINDS OF PARTNERSHIP As to nature of business (TNt) Trading Partnership-it buys and sells goods Non-trading Partnership-renders service As to purpose (CP) Commercial Partnership-engages in trading, merchandising or manufacturing of goods for a profit. b. General Professional Partnership-for exercise of profession. 3. As to object (UP) a. Universal partnership 1) Of all present property-partners contribute all their present property to a common fund with the intention of dividing among themselves the property and all the profits they may acquire therewith.

1. a. b. 2. a.

Page 2 of 3
2) Of profits-the partners retain ownership of the things they have placed into the common fund. Their actual contribution will be their industry and the use of the things they have placed into the common fund. As a result, only the profits that the partners may acquire by their industry during the existence of the partnership will be divided among themselves. b. Particular partnership-a partnership which has for its object determinate things, their use or fruits, or a specific undertaking or exercise of a profession or vocation.

4. As to liability (GeL) a. General partnership-comprised of general partners or a combination of b. 5.

a. b. 6. a. b. V.

general and industrial partners. They are personally liable for the partnerships debt after the exhaustion of its assets. Limited partnership-comprises both limited and general partners. As to duration Partnership at will-formed for a particular undertaking and may be terminated any time by the will of any partners or by mutual agreement of the partners. Partnership with a fixed term-formed with a specified period of existence. As to legality De jure partnership-has complied with all legal requirements for its existence. De facto partnership-has not complied all the legal requirements for its existence. KINDS OF PARTNERS As to contribution (CI Ci) Capitalist partner-contributes money or property Industrial partner-contributes his skills or industry Capitalist-industrial partner-contributes money or property and industry. As to liability (GeL) General partner-assumes unlimited liability,i.e., his liability extend up to his personal assets. Limited partner-liable to the extent of his capital contribution to the partnership. As to participation (LMaS) Managing partner-appointed to run the business of the partnership. Silent partner-known as partner but does not take active participation in running the affairs of the partnership. Liquidating partner-appointed to liquidate the partnership assets and settle unfinished transactions of the partnership after dissolution. As to third persons (DOS) Secret partner-not known as partner but takes active part in running the partnership business. Dormant partner- not known as partner and does not take active part in running the partnership business. Nominal partner or ostensible partner- a partner in name only by permitting the use of his name either for accommodation or for consideration. He is subject to liability by the doctrine of estoppel. Takes active Participation ? No Yes No

1. a. b. c. 2. a. b. 3. a. b. c. 4. a. b. c.

1 silent 2 secret 3 dorman

Known? Yes No No

Page 3 of 3
t END!