PARTERSHIP AND CORPORATION -An association of two or more persons to carry on,

as co-owners, a business for profit (Uniform

(REVIEWER)
Partnership Act, Section 6).
HISTORY OF PARTNERSHIP
-The partnerships has a juridical personality
Hammurabi (2200 BC) - King of Babylon, separate and distinct from that of each of the
provided the regulation of partnerships. partners (Civil Code of the Philippines, Article

Societa – a term that referred to partnership in 1768).

Ancient Rome. -Partnerships are generally associated with the

Middle Ages (Italy) – it was these years that the practice of law, public accounting, medicine and

laws of partnership began to develop. other professions. Partnerships of this nature are
called general professional partnerships.
Italian Merchants – operated as limited partners.
Partner – the owner of the partnership.
English setters – brought the concept of partnership
into the US. CHARACTERISTICS OF A PARTNERSHIP

English law – Partnership Act of 1890. 1. Mutual Contribution – there cannot be a

partnership without contribution of money,
August 30, 1950 – effectivity of Civil Code.
property or industry.
-Two types of partnerships in the Philippines before 2. Division of Profit or Losses – each partner
the effectivity of new Civil Code: must share in the profits or losses of the
venture.
1. Commercial or mercantile partnership –
3. Co-ownership of Contributed Assets – all
governed by the Code of Commerce.
assets contributed into the partnership are
2. Civil or non-commercial partnership –
owned by the partnership.
governed by the old Civil Code.
4. Mutual Agency – any partner can bind the
DEFINITION OF PARTNERSHIP
other partners to a contract if he is acting
-In a contract of partnership, two or more persons within his express or implied authority.
bind themselves to contribute money, property, or 5. Limited Life – it may be dissolved by the
industry to a common fund, with the intention of admission of death, insolvency, incapacity,
dividing the profit among themselves (Civil Code withdrawal of a partner or expiration of the
of the Philippines, Article 1767). term specified in the partnership agreement.

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 6. Unlimited Liability – all partners are Corporation Code of the Philippines; in
personally liable for all debts incurred by the Chapter 5).
partnerships. 3. Commencement of Juridical Personality -
7. Income Taxes – subject to tax at the rate of juridical personality commences from the
30% per RA No.9337 (except general execution of the articles of a partnership, in
professional partnerships). a corporation, from the issuance of
8. Partners’ Equity Accounts – each partner certificate of incorporation by the Securities
has a capital account and a withdrawal and Exchange Commission.
account that serve similar functions as the 4. Management - every partner is an agent of
related accounts for sole proprietorships. the partnership if the partners did not
appoint a managing partner; in a
ADVANTAGES VERSUS CORPORATIONS
corporation, management is vested on the
1. Easier and less expensive to organize. Board of Directors.
2. More personal and informal. 5. Extent of Liability - each of the partners

DISADVANTAGES except a limited partner is liable to the

1. Easily dissolved and thus unstable compared extent of his personal assets; in a

to a corporation. corporation, stockholders are liable only to

2. Mutual agency and unlimited liability may the extent of their interest or investment in

create personal obligations to partners. the corporation.

3. Less effective than a corporation in raising 6. Right of Succession - there is no right of

large amounts of capital. succession; in a corporation, there is right of

succession. A corporation has the capacity of
PARTNERSHIP DISTINGUISHED FROM
continued existence regardless of the death,
CORPORATION
withdrawal, insolvency, or incapacity of its
1. Manner of Creation - a partnership is
directors or stockholders.
created by mere agreement of the partners
7. Term of Existence - for any period of time
while a corporation is created by operation
stipulated by the partners; in a corporation,
of law.
not to exceed 50 years but subject to
2. Number of Persons - two or more persons
extension.
may form a partnership; in a corporation, not
exceeding fifteen (15). A corporation with a CLASSIFICATIONS OF PARTNERSHIPS

single stockholder is considered a One  ACCORDING TO OBJECT

Person Corporation (Sec. 10, Revised

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 1. Universal Partnership of All Present 1. Commercial or Trading Partnership - one
Property - all contributions became part of formed for the transaction of business.
the partnership fund. 2. Professional or Non-Trading Partnership -
2. Universal Partnership of Profits - all that one formed for the exercise of profession.
the partners may acquire by their industry or  ACCORDING TO LEGALITY OF
work during the existence of the partnership EXISTENCE
and the use of industry or work during the 1. De jure Partnership - one which has
existence of the partnership and the use of complied with all the legal requirements for
whatever the partners contributed at the time its establishment.
of the institution of the contract belong to 2. De facto Partnership - one which has failed
the partnership. If the articles of universal to comply with all the legal requirements for
partnership did not specify its nature, it will its establishment.
consider a universal partnership of profits.
KINDS OF PARTNERS
3. Particular Partnership - the object of the
partnership is determinate- its sue or fruit, 1. General Partner. - liable to the extent of his

specific undertaking, or the exercise of a separate property after all the assets of the

profession or vocation. partnership are exhausted.

 ACCORDING TO LIABILITY 2. Limited Partner - liable only to the extent

1. General - all partners are liable to the extent of his capital contribution. He is not allowed

of their separate properties. to contribute industry or services only.

2. Limited - the limited partners are liable only 3. Capitalist Partner - contributes money or

to the extent of their personal contributions. property to the common fund of the

In a limited partnership, the law states that partnership.

there shall be a least one general partner. 4. Industrial Partner - contributes his

 ACCORDING TO DURATION knowledge or personal service to the

1. Partnership with fixed term or for a particular partnership.

undertaking. 5. Managing Partner - whom the partners has

2. Partnership at Will - one in which no term is appointed as manager of the partnership.

specified and is not formed for any particular 6. Liquidating Partner - designated to wind

undertaking. up or settle the affairs of the partnership

 ACCORDING TO PURPOSE after dissolution.

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 7. Dormant Partner - does not take active part statements, and audits by independent public
in the business of the partnership and is not accountants.
known as a partner. 7. The method of sharing profit or loss,
8. SILENT PARTNER - does not take active frequency of income measurement and
part in the business of the partnership though distribution, including any provisions for the
may be known as a partner. recognition of differences in contributions.
9. Secret Partner - takes active part in the 8. The drawings or salaries to be allowed to
business but is not kwon to be a partner by partner.
outside parties. 9. The provision for arbitration of disputes,
10. Nominal Partner or Partner By Estoppel - dissolution, and liquidation.
actually not a partner but who is represents
Contract of Partnership - is void whenever
himself as one.
immovable property or real rights are contributed
ARTICLES OF PARTNERSHIP and a signed inventory of the said property is not
made attached to public instrument.
A partnership may be constituted orally or in
writing. In the latter case, partnership agreements Limited Liability Company - a hybrid form of
are embodied in the articles of partnership. business for it combines the best features of a
partnership and a corporation. LLC is a form of
1. The partnership name, nature, purpose and
legal entity that provides limited liability to its
location.
owners.
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 (as capital
or as loan) and the penalties for a partner’s
failure to invest and maintain the agreed
capital.
5. The rights and duties of each partner.
6. The accounting period to be adopted, the
nature of accounting records, financial

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