You are on page 1of 1

Rules for distribution of profits and losses

Distribution of profits
o The partners share the profits according to their agreement subject to Art. 1816
o If there is no such agreement
Share of each capitalist partner shall be in proportion to his capital contribution. This rule is based on the presumed will of the
partners
Share of industrial partner must be satisfied first before the capitalist partners divide the profits. Amount will be based on what
is just and equitable under the circumstances. The share of an industrial partner in the profits is not fixed, as in the case of capitalist
partners, because it is very difficult to ascertain the value of services
A partner is entitled to receive only his share of the profits actually realized by the venture. Even when assurances of huge profits
were made by a partner, in the absence of fraud, the other partner cannot claim right to recover profits promised. This is especially
true when the business was highly speculative and turned out to be a failure Hidden risks in any business venture have to be
considered
Distribution of losses
o According to the Agreement of the Partners, subject to Art. 1799
o If no agreement, but the contract provides for the share of the partners in the profits, the share of each in the losses shall be
according to the profit-sharing ratio
However, the industrial partner shall NOT be liable for losses
To determine profits or losses, all transactions must be considered, not only one particular transaction
o If also no profit-sharing stipulated in the contract, losses shall be borne by the partners in proportion to their capital contributions
But the purely industrial partner shall NO

Art 1797, 1977 of the NCC discusses the rules for distribution of profits and losses

Partners are liable to creditors (including industrial partners) for obligations contracted in the name and for
the account of the partnership. Liabilities are pro-rata and subsidiary
Understood to mean equally or jointly and not proportionately which is its literal meaning. Based on the number of partners and not
on the amount of their contributions to the common fund, subject to adjustment among the partners
o If a partner has left the country, cannot increase the liability of the other partners
o Subsidiarily partners are liable as guarantors of the partnership. When the assets of the partnership are exhausted, the private
properties of the partners are liable
o Industrial partners would also have to pay but may recover from the capitalist partner unless there is an agreement to the contrary
Exception:
o The industrial partner to pay losses relates exclusively to the settlement of the partnership affairs among the partners themselves
and has nothing to do with the liabilities of the partners to third persons. An industrial partner is not exempted from liability to third
persons for the debts of the partnership