In a contract of partnership, two or more persons bind themselves to contribute:

•Money

•Industry

•Property

to a common fund, with the intention of dividing the profit among themselves.

Each owner is called a partner.

Civil Code of the Phil. Art# 1767 – allows 2 or more persons to form a partnership for the exercise of a profession.

Partnerships are generally associated with the practice of law, public accounting, medicine and other profession. These are called : General professional partnerships.

Characteristics of Partnerships

1. Mutual contribution

2. Division of Profits or Losses

3. Co-Ownership of Contributed Assets

4. Mutual Agency

5. Limited Life

6. Unlimited Liability

7. Income Taxes

8. Partners’ Equity Accounts

Partnership vs Corporation

• Manner of creation – agreement vs operation of law

• number of person – 2 or more vs min of 5 not more than 15

• commencement of Juridical Personality – articles of partnership vs cert of incorp by SEC

• Management – partner vs Board of Directors

• Extent of Liability – up to extent of personal assets vs extent of interest or investment

• Right of Succession – no right of succession vs right of succession

• Terms of Existence – stipulated by partners vs max of 50 years but subject to extension

Advantages and Disadvantages of Partnership

Advantages versus Proprietorship

1. Brings greater financial capability to the business.

2. Combines special skills, expertise and experience of the partners

Offers relative freedom and flexibility of action in decision-making

Advantages versus Corporations

1. Easier and less expensive to organize

2. More personal and informal

Disadvantage

1. Easily dissolved and thus unstable compared to a corporation

2. Mutual agency and unlimited liability may create personal obligations to partners

3. Less effective than a corporation in raising large amounts of capital

4. Had limited life

Object Liability Duration Purpose Legality

Of existence

•Universal partnership of all personal property

•Universal partnership of profits

•Particular partnership

•General

•Limited

•Partnership with a fixed term or for a particular undertaking

•Partnership at will

•Commercial or trading partnership

•Professional or non-trading partnership

•De jure partnership

•De facto partnership

1. General partner

2. Limited partner

3. Capitalist partner

4. Industrial partner

5. Managing partner

6. Liquidating partner

7. Dormant partner

8. Silent partner

9. Secret partner

10.Nominal partner or partner by estopped

Capital P3,000

Purpose:

To set “a condition for the issuance of the licenses to engage in business or trade.”

SEC Registration

Steps:

1. Verification of business name in the verification unit of SEC

2. Submit the following documents

• Articles of partnership

• Verification slip for the business name

• Written undertaking to change business name if required

• Tax identification number of each partner and/or that of the partnership

• Registration data sheet for partnership duly accomplished in six copies

• Other documents that may be required

3. Pay the registration/filing and miscellaneous fees

4. Forward documents to the SEC Commissioner for signature