By :

John Razel A. Mapaye

Bienz Ruezan Azas

Partners
hip

HAT
IS A

PARTNERSHIP

- is an unincorporated
association of two or more
individuals to carry on, as coowners, a business, with the
intention of dividing the profits
among themselves.

CP

haracteristics
of a

artnership
Ease of formation
as compared to
corporations, the
formation of a
Separate
partnershiplegal
requires
personality
less formality.
the partnership has a
judicial personality
separate and distinct from

CP

haracteristics
of a

artnership
Mutual Agency
the partners are agents of
the partnership for the
purpose of its business. As
such, a partner may legally
bind this partnership to a
contract or agreement that
is in line with the
partnerships operations.

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haracteristics
of a

artnership
Co-ownership of
property
each partner is a coowner of the properties
invested in the partnership
and each has an equal right
with his to possess a
specific partnership
property for partnership

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haracteristics
of a

artnership
Co-owneship of profits
a partnership is created
as a business ( a profit
oriented entity) as such,
each partner is entitled to
his share in the partnership
profit. A stipulation which
excludes one or more
partners from any share in

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haracteristics
of a

artnership

Limited life
the creation of a
partnership is basically
consensual. As such, a
a. by the express
will of any partner
partnership
may be
b. by the termination
of a definite term stipulated
dissolved:
in the contract.
c. by any event which makes it unlawful to carry
out the partnership
d. when a specific thing which a partner had

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haracteristics
of a

artnership
Unlimited liability
each partner, including
industrial ones, may be held
personally liable to
partnership debt after all
partnership assets have been
exhausted. If a partner is
personally insolvent, his
share in the partnership debt

A partnership is
which all
partners are
individually
liable is called a
general
partnership.

A limited
partnership
includes at least
one general
partner who
maintains
unlimited liability.
The other, called
limited partners,

Advantages of a Partnership
Ease of formation
Greater
capital
compared to
sole
proprietorshi
p
Flexibility in the
decision making

Shared
responsibility of
the running the
business
Relative lack of
regulation as
compared to
corporations

Disadvantages of a Partnership
Easily
dissolved
/Limited life
Lesser capital
compared to
a corporation

Conflict among
partners

Unlimited
Liability

A partnership
(other than a
GPP) is taxed
like a
corporation.

Formation
A contract of partnership is consensual. It is
created the agreement of the partners which
may be constituted in any form, such as oral or
written.
However, Articles 1771 and 1772 of the Phil
Civil Code requires that a partnership
agreement be made in a public instrument
and recorded in the office of the SEC when:
a. immovable property or real rights are contributed
to the partnership, or
b. the partnership has a capital of P3,000 or more

CP

haracteristics
of a

artnership
Transfer of ownership
in case of dissolution, the
transfer of ownership,
whether to anew partner or
existing partner, requires
the approval of the
remaining partners.

Formation
A contract of partnership is
consensual. It is created the
agreement of the partners which
may be constituted in any form, such
as oral or written.
However, Articles 1771 and 1772
of the Phil Civil Code requires that a
partnership agreement be made in a
public instrument and recorded in
the office of the SEC when:

Formation
Art. 1773 further requires than an
inventory of all immovable property
contributed to the partnership should
be made and signed by the parties,
and attached to the public
instrument otherwise the partnership
shall be deemed void.
A partnerships legal existence
begins from the moment the contract
is executed, unless it is otherwise

ations of contributing partners

Art. 1787 of the Civil Code states that when the
capital or part thereof which a partner is bound to
contribute consists of goods, their appraisal must be
made in the manner prescribed in the contract of
partnership, and in the absence of stipulation, it shall
be made by experts chosen by the partners, and
according to current prices, the subsequent changes
thereof being for the account of the partnership
Appraisal = Fair Value
All assets contributed to ( and related liabilities
assumed by) the partnership shall be measured at
fair value.

Type of
Contributi
on
Cash and
cash
Equivalent
s
Inventory

Fixed
Asset

Fair Value

Face amount
Net realizable value
(estimated selling price less
costs to complete and sell), if
lower than cost.
Order of priority:
a. Price in a binding sale
agreement

Financial
Instrume
nts
(Financia
l Assets
and
Financial
Liabilitie
s)

Order of priority;
a. Quoted price in an active
market
b. Fair value based on
observable data (e.g. price in
recent market transaction or
quoted price of a similar
instrument)
c. Estimate based on the best
information available (e.g.
measurements developed

Partnership Formation for the

First Time- Initial Investment

 Non-Cash Investment

Bonus or Goodwill on Initial

Investment

Sole Proprietorship and another

Individual Form a Partnership

Sole Proprietorships Books are

Retained for the Partnerships.

Two Proprietorship Form a

Partnership