Unit 1 and 2
Nature and Formation of a Partnership
A partnership is a contract whereby two or more persons bind themselves to contribute
money, property or industry into a common fund with the intention of dividing the profit
among themselves (Article 1767 of the Civil Code of the Philippines). This joint effort
may be supported by a partnership agreement known as the Articles of Co-Partnership,
which is an agreement in writing among the partners governing the nature and terms of
the partnership contract. A written agreement is required when partnership capital is P
3,000 or more in money or in property. The Article of Co-partnership helps in avoid
misunderstanding among the partners. The written agreement among the partners
governs the formation, operation and dissolution of the partnership and is required to be
registered with SEC. The Article of Co-partnership contains the following information:
1. The name of the partnership;
2. The names, addresses of the partners, classes of partners stating whether the
partner is a general or a limited partner;
3. The effective date of the contract;
4. The purpose and principal place of business of the business;
5. The capital of the partnership stating the contributions of each of the partners;
6. The rights and duties of each of the partners;
7. The manner of dividing profit or loss among the partners;
8. The conditions under which the partners may withdraw money or other assets;
9. The manner of keeping the books of accounts;
10. The causes for dissolution and the provision for arbitration in settling disputes.
Characteristics of a Partnership
1. Based on contract – partnership is formed through the mutual agreement of all the
partners. The contract may be written or oral.
2. Voluntary association – no one should be forced or coerced in joining a
partnership.
3. Mutual agency – any partner may act as an agent of the partnership in conducting
its affairs.
4. Limited life – a partnership may be dissolved at any time by action of the partners
or by operation of law. The withdrawal, death, retirement, bankruptcy, incapacity
of a partner and the admission of a new partner dissolves the partnership.
5. Unlimited liability – the personal assets of a general partner may be used to
satisfy the claims of the creditors of the partnership if the partnership assets are
not enough to settle the liabilities to outsiders upon liquidation.
6. Co-ownership of property – properties contributed to the partnership are owned
by the partnership. Properties invested by a partner cease to be his own personal
property.
Nature and Formation of a Partnership
A partnership is a contract whereby two or more persons bind themselves to contribute
money, property or industry into a common fund with the intention of dividing the profit
among themselves (Article 1767 of the Civil Code of the Philippines). This joint effort
may be supported by a partnership agreement known as the Articles of Co-Partnership,
which is an agreement in writing among the partners governing the nature and terms of
the partnership contract. A written agreement is required when partnership capital is P
3,000 or more in money or in property. The Article of Co-partnership helps in avoid
misunderstanding among the partners. The written agreement among the partners
governs the formation, operation and dissolution of the partnership and is required to be
registered with SEC. The Article of Co-partnership contains the following information:
1. The name of the partnership;
2. The names, addresses of the partners, classes of partners stating whether the
partner is a general or a limited partner;
3. The effective date of the contract;
4. The purpose and principal place of business of the business;
5. The capital of the partnership stating the contributions of each of the partners;
6. The rights and duties of each of the partners;
7. The manner of dividing profit or loss among the partners;
8. The conditions under which the partners may withdraw money or other assets;
9. The manner of keeping the books of accounts;
10. The causes for dissolution and the provision for arbitration in settling disputes.
Characteristics of a Partnership
1. Based on contract – partnership is formed through the mutual agreement of all the
partners. The contract may be written or oral.
2. Voluntary association – no one should be forced or coerced in joining a
partnership.
3. Mutual agency – any partner may act as an agent of the partnership in conducting
its affairs.
4. Limited life – a partnership may be dissolved at any time by action of the partners
or by operation of law. The withdrawal, death, retirement, bankruptcy, incapacity
of a partner and the admission of a new partner dissolves the partnership.
5. Unlimited liability – the personal assets of a general partner may be used to
satisfy the claims of the creditors of the partnership if the partnership assets are
not enough to settle the liabilities to outsiders upon liquidation.
6. Co-ownership of property – properties contributed to the partnership are owned
by the partnership. Properties invested by a partner cease to be his own personal
property.
