BDA Advantages of Partnership
NATURE AND FORMATION OF PARTNERSHIP 1. Easy and inexpensive to organize
2. Better opportunity of having additional capital
Any changes in entity must be applied at the Securities and Exchange 3. Reliable from the POV of creditors
Commission to obtain SEC certificate 4. Direct gain of income
5. Personal element/touch is retained
Civil Code of the Philippines Article 1767
• Partnership – a contract whereby 2 or more persons bind Disadvantages of Partnership
themselves to contribute money, property, or industry into a 1. Misunderstanding
common fund with the intention of dividing profits among 2. Divided Authority
themselves 3. “The act of one is the act of all”
4. Limited Life
Characteristics of a Partnership
Characteristic Description Classes of Partners
Voluntary Agreement 1. Nature of Contributions
Mutual Contribution → Capitalist Partner – cash/property
Mutual Agency A partner can act in behalf of his → Industrial Partner – labor/skill/talent/service
partner → Capitalist-Industrial Partner – cash/property/industry
Unlimited Liability The personal assets of any partner may 2. Obligation to Third Persons (liability)
be used to satisfy the partnership → General Partner – extends to his separate property
creditors’ claim if partnership assets are → Limited Partner – only to his capital contribution
not enough to settle the liabilities to 3. Management of Partnership
outsiders → Managing Partner - active
Limited LIfe Partnership may be dissolved anytime → Silent Partner - inactive
Mutual Participation in Profits 4. Others
Legal Entity Distinct from the legal personality of → Ostensible Partner – known and active
each partner → Secret Partner – not known but active
Co-ownership of Property Property contributed are owned by the → Dormant Partner – not known and inactive
partnership → Liquidating Partner – in charge of the winding up of partnership
Liability for Income Taxes Only trading partnerships are liable to → Nominal Partner – made liable as a partner for the protection of
pay the 30% income tax innocent third persons
Trading Partnerships – purchase and sale of the merchandise
General Professional Partnerships – render service to customers
NATURE AND FORMATION OF PARTNERSHIP 1. Easy and inexpensive to organize
2. Better opportunity of having additional capital
Any changes in entity must be applied at the Securities and Exchange 3. Reliable from the POV of creditors
Commission to obtain SEC certificate 4. Direct gain of income
5. Personal element/touch is retained
Civil Code of the Philippines Article 1767
• Partnership – a contract whereby 2 or more persons bind Disadvantages of Partnership
themselves to contribute money, property, or industry into a 1. Misunderstanding
common fund with the intention of dividing profits among 2. Divided Authority
themselves 3. “The act of one is the act of all”
4. Limited Life
Characteristics of a Partnership
Characteristic Description Classes of Partners
Voluntary Agreement 1. Nature of Contributions
Mutual Contribution → Capitalist Partner – cash/property
Mutual Agency A partner can act in behalf of his → Industrial Partner – labor/skill/talent/service
partner → Capitalist-Industrial Partner – cash/property/industry
Unlimited Liability The personal assets of any partner may 2. Obligation to Third Persons (liability)
be used to satisfy the partnership → General Partner – extends to his separate property
creditors’ claim if partnership assets are → Limited Partner – only to his capital contribution
not enough to settle the liabilities to 3. Management of Partnership
outsiders → Managing Partner - active
Limited LIfe Partnership may be dissolved anytime → Silent Partner - inactive
Mutual Participation in Profits 4. Others
Legal Entity Distinct from the legal personality of → Ostensible Partner – known and active
each partner → Secret Partner – not known but active
Co-ownership of Property Property contributed are owned by the → Dormant Partner – not known and inactive
partnership → Liquidating Partner – in charge of the winding up of partnership
Liability for Income Taxes Only trading partnerships are liable to → Nominal Partner – made liable as a partner for the protection of
pay the 30% income tax innocent third persons
Trading Partnerships – purchase and sale of the merchandise
General Professional Partnerships – render service to customers
