Partnership

- It is a contract whereby two or more persons bind themselves to contribute money,

property or industry into a common fund with the intention of dividing the profit among
themselves. (Section 2, Article 1767, Civil Code of the Philippines)

* Two or more persons may also form a partnership for the exercise of a profession.

Three Attributes/Characteristics to Determine a Partnership:

1) There must be an agreement, either expressed or implied, between two or more

persons.
2) The business must be operated for the purpose of making a profit.
3) Members of the firm must be co-owners of the business.

Co-ownership involves the right of each partner to:

1) Share in the profits of the business

2) Participate in the management of the business
3) Hold an interest in property

Characteristics of a Partnership:

1) Mutual Agency
2) Unlimited Liability
3) Limited Life
4) Mutual Participation in Profits
5) Legal Entity
6) Co-Ownership of Contributed Assets
7) Income Tax

Accounting Equation:

Assets =Liabilities + Owner’s Equity

*Limited Partner- di pwedeng habulin sa utang kasi limited lang.

*Di pwedeng lahat limited, kailangan meron kahit isang general partner.

*The general partner will serve as the guarantor.

Dissolution/Liquidation

- the partnership is to be dissolved/ closed.

Causes of Dissolution/Liquidation:

1) Partnership Withdrawal – umalis yung isang partner.

2) Admission of a Partner – may dumagdag na partner.
3) Legal Incapacity – kapag nakulong.
4) Physical Incapacity – naputol ang paa, naputol ang daliri.
5) Death of a Partner – namatay ang isa sa partner.

*Tax in a Partnership is 30%.

*Trade Business - taxable, Professional Practice – non-taxable.

Essential Features of a Partnership:

1) There must be a valid contract. (it should not be against any existing law)
2) The parties must have legal capacity to enter into the contract.
3) There must be a mutual contribution of money, property and industry into a
common fund.
4) The object must be lawful. (ex. a business of shabu is not allowed)
5) The primary purpose is to obtain profit and to divide the same among the parties.
(partnership is void if there is no division of profits)

Not allowed to enter contracts are:

1) Minors (there should be a guardian).

2) Those who are in jail (they are legally incapacitated).
3) Mental Incapacity (except when during lucid interval, it would be valid).

Partnership Contract

-It is referred to as Articles of Partnership

-It may be an oral or written agreement.

-The written agreement governs the formation, operations and dissolution of a

partnership.

-Required when a partnership capital is P3,000 or more in money or property and

must be registered with the Securities and Exchange Commission.

How to Organize a Business:

1) Think about your concept.

2) Look for a location.
3) How much is the capital? (there should be a feasibility study)
4) Who are your prospective customers?
5) Apply to Department of Trade and Industry
6) Bring certification of DTI to Municipal Hall for Mayor’s permit and license
7) Bring to Bureau of Internal Revenue
8) Register to specialized government agency.

*Partnerships don’t need to register to DTI. They should register to SEC directly.

*Doesn’t allow rhyming or look-alike names to business.

Example: Mercury Drug – Memory Drug, Jollibee Foods Corp. – Jubilee Foods Corp.

(It may cause misleading to customers)

*Corporation doesn’t allow names that include:

1) Philippines 2) National 3) Baranggay Names 4) Town Names

Partnerships distinguished from a Corporation:

1) Manner of creation.
In a corporation, the contract is not valid unless given certification.
In a partnership, business is alive once there is an agreement.
2) Number of Persons, (Corp.-5 minimum, 12-15 maximum. Part.- 2 or more)
3) Commencement of Juridical Personality
Partnership-agreement, Corporation- certification
4) Management
5) Extent of Liabilities- partners are liable only up to the extent of their investment
(same goes with the corporation)
6) Right of Succession (Partnership- there is no right to succession as stated in the
principle of delectus personae meaning you choose your partner while in
Corporation- continue pa rin kahit ano mangayri)
7) Terms of Existence- (Partnership- limited life) (Corp- up to 50 years)

Classifications of Partnership:

1) As to extent of Subject Matter:

A. Universal Partnership of All Present Property-contribution of assets
B. Universal Partnership of Profits-division of profits
C. Particular Partnership- practice of profession, specific business
2) As to liability:
A. General Partnership- each member is a general partner
B. Limited Partnership- most of the partners are limited but there will still be a
general partner needed