LAW ON PARTNERSHIP

Partnership (ART 1767) Characteristic Elements of a Partnership

By the contract of Partnership, two or more persons bind 1. Consensual
themselves to contribute money, property, or industry to a 2. Nominate
common fund with the intention of dividing the profits among 3. Bilateral
themselves. 4. Onerous
Two or more persons may also form a partnership for the 5. Commutative
exercise of a profession. 6. Principal
7. Preparatory
Corporation (ART 1459)
A corporation is an artificial being created by operation of Essential Features of a Partnership:
law, having the rights of succession and the powers, attributes and 1. There must be a VALID CONTRACT
properties expressly authorized by law or incidental to its existence. 2. The parties must have LEGAL CAPACITY to enter into the
PARTNERSHIP CO- CORPORATION contract.
OWNERSHIP
3. There must be a mutual contribution of money, property, or
CREATION By contract, Created Created by Law industry to a COMMONFUND.
mere by Law
4. There must be a LAWFUL OBJECT
agreement of
5. The purpose or primary purpose must be to obtain PROFITS
the parties
JURIDICAL Has a juridical NONE Has a juridical and DIVIDE the same among the parties.
PERSONALITY personality personality
separate and separate and Sharing of Profits
distinct from that distinct from that 1. Not necessarily in equal shares
of each partner of each partner
2. Not conclusive evidence of partnership
PURPOSE Realization of Common Depends on the
enjoyment
Sharing of Losses
profits articles of
of a thing 1. Necessary result of sharing in profits
incorporation
or a right 2. Agreement is not necessary.
Duration No limitation 10 years 50 yrs. max,
max renewal is not EFFECTS OF UNLAWFUL PARTNERSHIP
more than 50 1. The contract is void ab initio and the partnership never
Disposal/ Partner may not Co-owner Stockholder has existed in the eyes of the law.
Transferabili dispose of his may a right to 2. The profits shall be confiscated in favor of the government.
ty of individual freely do transfer shares 3. The instrument and proceeds of the crime shall also be
interest interest unless so without prior
forfeited in favor of the government.
agreed upon by consent of other
4. The contributions of the partners shall not be confiscated
all partners stockholders
Power to act Each partner is Co-owner Management is unless they fall under no. 3
w/ 3rd agent of cannot vested with the
person partnership represent Board of CREATION OF PARTNERSHIP
the co- Directors  A partnership may be constituted in any form, except where
ownershi immovable property or real rights are contributed thereto,
p in which case a public document shall be necessary.
Effect of Dissolution Not Does not  Partnership with capital of P3000 or more shall appear in
Death necessaril dissolve public document and recorded in the office of SEC.
y dissolve corporation  A contract of partnership is void, whenever immovable
Dissolution Anytime with Anytime, With the consent property is contributed thereto, if inventory of said
consent of any consent property is not made signed by the parties and attached to
or all partners of all or the public instrument.
any co-
owners
RULES TO DETERMINE EXISTENCE OF PARTNERSHIP
# of Minimum of 2 Minimum Greater or equal
Incorporators 1. Persons who are not partners as to each other are not
of 2 to 1, but less
than 15 partners as to 3rd persons
Commencem From the None From date of 2. Co-ownership does not of itself establish a partnership
ent of moment of issuance of whether such co-owner do or do not share any profits.
Juridical execution of certificate of 3. Sharing of gross return does not of itself establish a
Personality partnership
contract of incorporation by
partnership the SEC 4. Sharing of profits does not of itself establish a partnership
DETERMINATION OF EXISTENCE OF PARTNERSHIP AS TO PURPOSE
1. The parties share in the profits and losses of the partnership 1. COMMERCIAL OR TRADINGPARTNERSHIP
2. They have equal rights in the management and conduct of —one formed for the transaction of business
the business. 2. PROFESSIONAL OR NON TRADINGPARTNERSHIP
3. Every parties are an agent of the partnership and entitled to —one formed for the exercise of a profession
bind the other partners by his act, for the purpose of its
business.
4. All parties are personally liable for the debts of the KINDS OF PARTNERS:
partnership with their separate property (except limited 1. CAPITALIST
partners) —one who contributes money or property to the common fund
5. A fiduciary relationship exists between the partners 2. INDUSTRIAL
6. On dissolution, the partnership is not terminated until the —one who contributes only his industry or personal service
winding up of the partnership is complete. 3. GENERAL
—one whose liability to 3rd persons extend to his separate property
CLASSIFICATION OF ALL PARTNERSHIP 4. LIMITED
AS TO EXTENT OF ITS SUBJECT MATTER —one whose liability to 3rd persons are limited to his capital
1. UNIVERSAL PARTNERSHIP contribution
a. UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY 5. MANAGING
-comprises the following: —one who manages the affairs or business of the partnership
i. Property which belonged to each of the partners 6. LIQUIDATING
at the time of the constitution of the partnership —one who takes charge of the winding up of partnership affairs
ii. Profits which they may acquire from all upon dissolution
property contributed 7. PARTNERS BY ESTOPPEL
b. UNIVERSAL PARTNERSHIP OF PROFITS —one who is not really a partner but is liable as a partner for the
- comprises all that the partners may acquire by their protection of innocent 3rd persons
industry or work during the existence of the partnership 8. CONTINUING PARTNER
NOTE: Persons who are prohibited from giving donations or —one who continues the business of a partnership after it has
advantage to each other cannot enter in a universal partnership. been dissolved by reason of the admission of a new partner,
2. PARTICULAR PARTNERSHIP—has for its objects: retirement, death or expulsion of one of the partners
a. Determinate things 9. SURVIVING PARTNER
b. Their use or fruits —one who remains after a partnership has been dissolved by
c. Specific undertaking death of any partner
d. Exercise of profession or vocation 10. SUBPARTNER
AS TO LIABILITY OF PARTNERS —one who is not a member of the partnership who contracts with
1. GENERAL PARTNERSHIP a partner with reference to the latter's share in the partnership
—consists of general partners who are liable pro rata and 11. OSTENSIBLE
subsidiary and sometimes solidary with their separate property for —one who takes active part and known to the public as partner in
partnership debts the business
2. LIMITED PARTNERSHIP 12. SECRET
—one formed by 2 or more persons having as members one or —one who takes active part in the business but is not known to be
more general partners and one or more limited partners, the latter a partner by outside parties
not being personally liable for the obligations of the partnership 13. SILENT
AS TO DURATION —one who does not take any active part in the business although
1. PARTNERSHIP AT WILL he may beknown to be a partner
—one in which no time is specified and is not formed for an 14. DORMANT
undertaking or venture which may be terminated anytime by —one who does not take active part in the business and is not
mutual agreement known held out as a partner
2. PARTNERSHIP WITH A FIXED TERM
—the term for which the partnership is to exist is fixed or agreed
upon or one formed for an undertaking
AS TO LEGALITY OF EXISTENCE
1. DE JURE PARTNERSHIP
—one which has complied with all the legal requirements for its
establishment
2. DE FACTO
—one which has failed to comply with all the legal requirements
for its establishment