Written Report In Investment Law Difference between Partnership and Corporation In terms of Investment

Submitted To: Atty !inda C "apu#

Submitted $y: "roup %

"roup !embers: &oyce S $a'aoisan Lenineto $er(an )ar(o Dia(o'o $en*amin &ose S +sto(as ,ince ! !anan'haya

Date: &u(y -./ -01-

Comparison between Partnership and Corporation regarding investment In terms of Capita( Artic(e 1232 of the 4ew Civi( Code provides that by contract of partnership two or more persons bind themse(ves to contribute money/ property/ or industry to common fund/ with the intention of dividin' the profits amon' themse(ves 5urthermore/ two or more persons may form a partnership for the e6ercise of profession A partner may contribute a sum of money re'ard(ess of amount or contributes on(y his industry or service as capita( The former re'arded as capita(ist whi(e the (atter is re'arded as industria(ist A partnership with Php %/000 00 or (ess capita( may re'ister its name with the Department and Trade and Industry whi(e a partnership with more than Php %/000 00 capita( may re'ister with Securities and +6chan'e Commission 7S+C8 9owever/ as provided by the 4ew Civi( Code/ partnership has *uridica( persona(ity separate and distinct from the partners even if it does not appear in a pub(ic instrument/ its capita( is more than Php %/000 00 and it is not recorded in the S+C Whereas/ a corporation as defined in The Corporation Code of the Phi(ippines as an artificia( bein' created by operation of (aw/ havin' the ri'ht of succession and the powers/ attributes and properties e6press(y authori#ed by (aw or incident to its e6istence In the same Code/ any number of natura( persons not (ess than five 7:8 but not more than fifteen 71:8/ a(( of (e'a( a'e and a ma*ority of whom are residents of the Phi(ippines/ may form a private corporation for any (awfu( purpose or purposes At the time of incorporation/ at (east twenty;five percent 7-:<8 of the authori#ed capita( stoc= as stated in the artic(es of incorporation must be subscribed/ and at (east twenty;five 7-:<8 percent of the tota( subscription must be paid upon subscription/ the ba(ance to be payab(e on a date or dates fi6ed in the contract of subscription without need of ca((/ or in the absence of a fi6ed date or dates/ upon ca(( for payment by the board of directors 9owever/ that in no case sha(( the paid;up capita( be (ess than five Thousand 7P:/000 008 pesos In terms of !ana'ement In terms of investin' the funds of a Partnership / when the mana'ement is not a'reed upon / every partner is an a'ent of the partnership hence / any partner can decide where/ when and how to invest 7 Art 1%0> Civi( Code 8 In a corporation/ the power to do business and mana'ement of its affairs are vested in the board of Directors 7Sec -% Corp Code 8 In terms of Liabi(ities ?rdinari(y/ when a person enters into a contract and assumes an ob(i'ation/ Art 1%11 of the Civi( Code e6press(y states that @contracts ta=e effect on(y between the parties their assi'ns and heirs A A *uridica( person/ therefore/ shou(d on(y be (iab(e by itse(f for contracts entered into by it This is apparent in the case of corporations where the investors are not (iab(e for the ob(i'ations entered into by the corporation because a corporation has a *uridica( persona(ity separate and distinct from the members or stoc=ho(ders that compose it In a partnership however/ despite it havin' a *uridica( persona(ity separate from that of the partners/ the partners are/ as a

'enera( ru(e/ (iab(e persona((y for partnership debts This is ca((ed the doctrine of un(imited (iabi(ity The doctrine of separate *uridica( persona(ity can be seen from many statutes foremost of which is the second section of the Corporation Code definin' a corporation The code defines a corporation as @an artificia( bein' created by operation of (aw/ havin' the ri'ht of succession and the powers/ attributes and properties e6press(y authori#ed by (aw or incident to its e6istence A This definition is the basis of the doctrine of separate juridical personality since the same definition ca((s a corporation a *uridica( person Attached to this separate *uridica( persona(ity is the attribute of (imited (iabi(ity The corporation is (i=e a separate entity ItBs as thou'h it were a person separate from you and you *ust 'et to contro( it If the corporation ma=es money/ you can dispurse it as the president of the corporation/ but there are ru(es that you need to fo((ow as a corporation If mu(tip(e peop(e own the corporation/ youB(( need to have documented who owns how much and who contro(s which parts of the corporation The advanta'e is that if the corporation fai(s and 'ets sued/ there is a (eve( of protection between the corporation and you Any (awsuits a'ainst the corporation supposed(y cannot reach throu'h and attach your assets/ *ust the assets of the corporation A partnership *ust means that two 7-8 or more peop(e eCua((y own and are eCua((y responsib(e for a business/ and if the business is sued/ the partners share eCua( responsibi(ity but if the business succeeds/ they share the wea(th eCua((y Corporations e6ist as virtua( or fictitious persons/ 'rantin' a (imited protection to the actua( peop(e invo(ved in the business of the corporation This (imitation of (iabi(ity is one of the many advanta'es to incorporation/ and is a ma*or draw for sma((er businesses to incorporateD particu(ar(y those invo(ved in hi'h(y (iti'ated trade Whi(e a 'enera( partnership provides no (iabi(ity protection and (imited investment opportunities/ it is easy to create and invo(ves simp(e ta6 reportin' +ach partnerBs ta6es are based on their own ta6 (eve(s A(( partners must reach an a'reement about the percenta'e each partner ho(ds in ownership as we(( as what ro(es each wi(( have in the business Income A corporation is ta6 on its net income at current(y %0< but if its a partnership/ same is ta6 at %0< but there wou(d be presumptive distribution of net income amon' partners which wi(( be sub*ected to ta6 a'ain In terms of Dividends 7Distribution8 Ender Partnership/ Art 12.2 of the 4ew Civi( Code states that the (osses and profits sha(( be distributed in conformity with the a'reement If on(y the share of each partner in the profits has been a'reed upon/ the share of each in the (osses sha(( be in the same proportion In the absence of stipu(ation/ the share of each partner in the profits and (osses sha(( be in proportion to what he may have contributed/ but the industria( partner sha(( not be (iab(e for the (osses As for the profits/ the industria( partner sha(( receive such share as may be *ust and eCuitab(e under the circumstances If besides his services he has contributed capita(/ he sha(( a(so receive a share in the profits in proportion to his capita(

Ender a Corporation/ Sec F% of the Corporation Code/ which 'overns the power of a corporation to dec(are dividends/ provides that the $oard of Directors of a stoc= corporation may dec(are dividends on(y out of the unrestricted retained earnin's which sha(( be payab(e in cash/ in property/ or in stoc= to a(( stoc=ho(ders on the basis of outstandin' stoc= he(d by them Accordin' to ,i((anueva/ profits cover a (ar'er meanin' than dividends and inc(ude benefits of any =ind/ the e6cess of va(ue over cost/ acCuisition beyond e6penditures/ 'ain or advance A dividend/ as app(ied to corporate stoc=/ is that portion of the profits or net earnin's which the corporation has set aside for ratab(e distribution amon' the stoc=ho(ders Dividends come from the profits Profits are not dividends unti( so declared or set aside by the corporation