Partnership

An Introduction to Partnership

Elizabeth Faye
Tenchaves
Prencepe John Rabaya
Carlo Malicay
Table of Contents
Brief History
Definition
Characteristics of a Partnership
Advantages of a Partnership
Disadvantages of a Partnership
Partnership Distinguished from
Corporation
Classification of Partnerships
Kind of Partners
Articles of Partnership
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Brief History
Partnerships in Ancient
Times
History of Laws of
Partnership
Partnerships in the
Philippines
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Partnerships in Ancient Times

In 2200 B.C., Hammurabi, King of Babylon,
provided for the regulation of partnerships.
In ancient Rome, the partnership was
called societa.
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History of Laws of Partnership

During the Middle Ages in Italy, it began to
develop, which was introduced throughout
Europe.
During colonial period, English setters brought
the concept in U.S.
In U.S., the English Law of partnership evolved
to the Partnership Act of 1890. Also, the Uniform
Partnership Act was approved in 1914 and the
Uniform Limited Partnership Act in 1916.
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Partnerships in the Philippines

Before August 30, 1950, there are two types of
partnership: commercial and civil. Commercial
partnerships were governed by the Code of
Commerce while civil partnerships were
governed by the old Civil Code.
But on August 30,1950, the new Civil Code was
established which repealed the provision of the
two latter codes. Also, the new Civil Code
incorporated the rules from the two American
Uniform Partnership.
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Definition
In Civil Code of the Philippines, Article
1767,
In a contract of partnership, two or more persons bind
themselves to contribute money, property, or industry to
a common fund, with the intention of dividing the profit
among themselves. Two or more persons may also form a
partnership for the exercise of a profession

In Uniform Partnership
Partnership Act, Section
is an association of two or6,
more
persons to carry on, as co-owners, a business
as profit.
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Characteristics of a Partnership
Each partner contributes money,
Mutual property or industry to a common
Contribution fund of the partnership.

Each partner shares in the profit or

Division of losses of the venture.
Profit or Losses
Co-ownership All assets contributed into the
of Contributed partnership are owned by he
partnership by virtue of its separate
Assets and distinct juridical personality.
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Characteristics of a Partnership
Mutual Any partner can bind the other
partners to a contract within
Agency his express or implied
authority.
A partnership has limited life
Limited Life due to dissolution.

Unlimited All partners, except limited

partners, are personally liable
Liability for all debts incurred by the
partnership.
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Characteristics of a Partnership
Partnerships are
Income subject to tax at
Taxes the rate of 30% of
taxable income.
Partners Each partner has a
Equity capital account and
Accounts a withdrawal
account.
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Advantages of a Partnership
Advantages versus Advantages versus
Proprietorship Corporation
1. Brings greater financial
capability to the
business. 1. Easier and less
2. Combines special skills, expensive to
expertise and experience organize.
of the partners. 2. More personal and
3. Offers relative freedom informal.
and flexibility of action in
decision-making.
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Disadvantages of a Partnership
Mutual Less
Easily
agency and effective
dissolved
unlimited than a
and thus
liability may corporation
unstable
create in raising
compared
personal large
to a
obligations amounts of
corporation.
to partners. capital.
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Partnership Distinguished from Corporation
Distinguished Partnership Corporation
Variables
Manner of Creation Created by mere Created by operation
agreement. of law.
Number of Persons Two or more persons At least five person
may form. but not exceeding
fifteen.
Commencement of From the execution of From the issuance of
Juridical Personality the articles of certificate of
partnership. incorporation by the
Security and
Exchange
Commissions.
Management Every partner is an Vested on the Board
agent. of Directors.
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Partnership Distinguished from Corporation

Distinguished Partnership Corporation
Variables
Extent of Liability Each partners, except Stockholders are
limited partners, is liable only to the
liable extent to his extent of their
personal asset. interest or
investment.
Right of Succession No right of Has right of
succession. succession.
Terms of Existence For any period Not to exceed fifty
stipulated by the years but subject to
partners. extension.
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Classification of Partnerships

Accordi
Accordi ng to
Accordi Accordi Accordi
ng to Legality
ng to ng to ng to
Duratio of
Object Liability Purpose
n Existen
ce
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1. According to object:
A. Universal partnership of all present property.
All contributions become part of the partnership fund.
B. Universal partnership of profits. All that the
partners may acquire by their industry or work during
the existence of the partnership and the use of
whatever the partners contributed at the time of the
institution of the contract belong to the partnership.
C. Particular partnership. The object of the
partnership is determinate its use or fruit, specific
undertaking, or the exercise of a profession or vocation.
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2. According to liability:
A. General. All partner are liable to the
extent of their separate properties.
B. Limited. The limited partners are liable
only to the extent of their personal
contributions. In a limited partnership, the
law states that there shall be at least one
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general
to Play partner.
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3. According to duration:
A. Partnership with affixed term or for
a particular undertaking.
B. Partnership at will. One which no
term is specified and is not formed for any
particular undertaking.
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4. According to purpose:
A. Commercial partnership. One
formed for the transaction of business.
B. Professional partnership. One
formed for the existence for the exercise of
profession.
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5. According to legality of existence:

A. De jure partnership. One which has
complied with all the legal requirements for
its establishment.
B. De facto partnership. One which has
failed to comply with all the legal
requirements for its establishment.
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Kind of Partners
General Limited Capitalist
Partner Partner Partner
Industrial Managing Liquidatio Dormant
Partner Partner n Partner Partner

Silent Secret Nominal

Partner Partner Partner
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Kind of Partners
1. General Partner. One who is liable to the
extent of his separate property after all the
assets of the partnership are exhausted.
2. Limited Partner. One who is liable to the
extent of his capital contribution. He is not
allowed to contribute industry or services only.
3. Capitalist Partner. One who contributes
money or property to the common fund of the
partnership.
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Kind of Partners
4. Industrial Partner. One who contributes his
knowledge or personal service to the partnership.
5. Managing Partner. One whom the partners has
appointed as manager of the partnership.
6. Liquidation Partner. One who is designated to
wind up or settle the affairs of the partnership after
dissolution.
7. Dormant Partner. One who does not take active
part in the business of the partnership and is not
known as a partner.
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Kind of Partners
8. Silent Partner. One who does not take
active part in the business of the partnership
though may be known as a partner.
9. Secret Partner. One who takes active part
in the business but not known to be a
partner by outside parties.
10. Nominal Partner. One who is actually not
a partner but who represents himself as one.
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Articles of Partnership
Itis a voluntary writtencontractbetween
two or among more than two persons to
place theircapital, labor, and skills in
business with the understanding that there
will be a sharing of the profits and losses
between/among partners.
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Articles of Partnership
These are the following provisions that the said article
may be contained:
1. The partnership name, nature, purpose and location;
2. The names, citizenship and residences of the partners;
3. The date of formation and the duration of the
partnership;
4. The capital contribution of each partner, the procedure
for valuing non-cash investments, treatment of excess
contribution and the penalties for a partners failure to
invest and maintain the agreed capital;
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Articles of Partnership
5. The rights and duties of each partner;
6. The accounting period to be adopted, the nature of
accounting records, financial statements and audits by
independent public accountants;
7. The method of sharing profit or loss, frequency of
income measurement and distribution, including any
provisions for the recognition of differences in
contributions;
8. The drawings or salaries to be allowed to partners;
9. The provision for arbitration of disputes, dissolution,
and liquidation.
Thank You!

Elizabeth Faye Tenchaves

Prencepe John Rabaya
Carlo Malicay

BSA 1A