Partnership:
nature and
basic
concepts
partnership
✗ Partnership is a contract whereby two or
more persons bind themselves to
contribute money, property or industry to
a common fund with the intention of
dividing profits among themselves.
(Article 1767, Civil Code of the
Philippines)
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Characteristics
✗ Mutual contribution - of money, ✗ Unlimited liability – all
property or industry to a common fund. partners (except limited
✗ Division of profits or losses- each partners) including industrial
partner must share in the profits or partners are personally liable for
losses of the venture all debts incurred by the
✗ Co-ownership of contributed partnership.
assets –all assets contributed to the ✗ Partnerships are subject to
partnership is owned by all of the income tax, except Gen.
partners. Professional Partnerships
✗ Mutual agency –any partner can bind ✗ Partner’s equity
the other partner to a contract accounts – accounting for
✗ Limited life - it can be dissolved partnership are much like
through the following ways: Admission of accounting for sole
a new partner, Death of a partner, proprietorships wherein each
Insolvency of a partner, Incapacity of a partner has a capital account
partner, Withdrawal of a partner, and a withdrawal account.
Expiration of the term specified in the
partnership agreement
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ESSENTIAL
FEATURES OF
1. Voluntary and a Fiduciary Agreement (delectus
PARTNERSHIP
personae – “Choice of the person”)
2. Mutual contribution of money, property and industry
–MONEY – currency (medium of exchange) w/c is
legal tender in the Philippines
–PROPERTY – tangible/intangible, real/personal,
movables/immovables,
–INDUSTRY – physical or mental skills and/or
knowledge
3. Primary purpose is to divide profits
4. Separate juridical personality (except General
Professional Partnership)
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1 Kinds of
partnership
According to Object
✗ UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY – all
properties of the partners before, during and after constitution of the
partnership belong to the partnership
✗ UNIVERSAL PARTNERSHIP OF PROFITS – only those acquired after
the constitution of the partnership belong to the partnership
✗ PARTICULAR PARTNERSHIP -The object of the partnership is
determinate – its use or fruit, specific undertaking, or the exercise of a
profession or vocation.
Note: husband and wife cannot enter into universal partnerships
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According to Liability According to legality
of its existence
✗ General partnership- one ✗ De jure partnership: one
consisting of general partners w/c has complied w/ all the
who are liable w/ their legal requirements for its
separate property for establishment.
partnership debts.
✗ De facto partnership: one
✗ Limited partnership- one w/c has failed to comply w/ all
formed by two or more persons the legal requirements for its
having as members one or establishment.
more general partners and one
or more limited partners, the
latter not being personally
liable for the obligations of the
partnership.
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According to Duration According to purpose
✗ Partnership with a fixed ✗ Commercial or trading
term or a particular partnership: one formed or
undertaking the transaction of business.
✗ Partnership at will -one in ✗ Professional or non-trading
which no term is specified and partnership: one formed for
is not formed for any the exercise of a profession.
undertaking. Maybe
terminated anytime by mutual
agreement
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2 Kinds of
partners
As to Contribution
✗ Capitalist partner-one who contributes money or
property to the common fund.
✗ Industrial partner -one who contributes his
knowledge or personal service to the partnership
✗ Capitalist-Industrial partner -contributes cash
/other assets and services
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As to Liability
✗ General partner- liable to the extent of his
separate property after all the assets of the
partnership are exhausted
✗ Limited partner -liable only to the extent of his
capital contribution
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As to Participation
✗ Managing partner -a partner who has been
appointed as manager of the partnership
✗ Ostensible partner-one who takes active part in
the business and is also known to the public as a
partner
✗ Dormant partner -one who does not take active
part in the business and is not known as a
partner
✗ Silent partner- one who does not take active part
in the business though maybe known as a
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partner
Other Kinds
✗ Liquidating partner -one who is designated to wind up or settle the
affairs of the partnership after dissolution
✗ Continuing partner- one who continues the business of the
partnership after it has been dissolved by reason of admission of a
new partner, retirement, death, or expulsion of one of the partners.
✗ Surviving partner-one who remains after a partnership has been
dissolved by the death of a partner
✗ Sub-Partner-One who is not a partner but an associate of a partner
in his share
✗ Nominal partner or partner by estoppel-One who is really not a
partner but represent himself as one
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Advantages
3 and
disadvantages
of partnership
Advantages Disadvantages
Shared resources provide Each partner is 100% responsible for
more capital for the business debts and losses
Each partner shares the total Selling the business is difficult—
profits of the company requires finding new partner
Similar flexibility and simple Conflicts and disagreements may
design of a proprietorship easily arise
Inexpensive to establish, Partnership ends when any partner
whether formal or informal decides to end it – very limited life
A limited partner is only Dissolution – a partnership is
liable up to his investment in dissolved and a new one is formed
the partnership only Liquidation – a partnership
ceases to exist for good
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Rights of a
partner
1. A partner has rights over specific partnership property.
2. A partnership has a right to share in the profits resulting from
business operations.
3. A partner has a right to share in the remaining assets upon
partnership liquidation after the 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.
6. A partner has a right to true and full information of all things
affecting the partnership.
7. A partner has a right to the formal account of partnership affairs
under certain circumstances.
8. A partner has a right to have partnership dissolved also under
certain conditions.
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Partnership
formation
Articles of co-partnership
1. Name of Partnership
2. The name, addresses and classes of partner
3. The effective date of the contract and life of partnership
4. The purpose/s of the partnership
5. Principal place of business
6. The capital of the partnership, stating the contribution of
individual partners, their description and agreed values
7. Manner of management of the partnership
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Articles of co-partnership
8. Manner of dividing the profits and losses among partners,
including salary allowances and interest on capita
9. The rights and duties of the partners
10. The conditions under which the partners withdraw money or
other assets
11. Manner of keeping the books of accounts
12. Manner of liquidating the partnership
13. Causes of dissolution; and
14. The provision for arbitration in settling disputes
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Registration
✗
Requirements
the partnership contract is to be registered with the Securities and
Exchange Commission (SEC) which will issue a certificate of
registration (if the capital is more than P3,000)
✗ the partnership business name is to be registered with the
Department of Trade and Industry which will issue a "Certificate of
Registration" of business name
✗ a mayor's permit will be secured from the city/municipality where
the business will operate
✗ the partnership must register with the Bureau of Internal Revenue
(BIR) to secure a tax identification number.
✗ the books of accounts, invoices and official receipts will also be
registered
✗ the partnership will also register with the Social Security System
(SSS) to secure a certificate of membership and employer ID
number, after which, all the employees of the partnership will also 21
be registered.
Thank
s!
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