Business Partnership Overview

Partnership

• A partnership is a business organization formed by two or more people who agree to combine their money, property, labor, and skills for a common business purpose.
• A partnership can be formed by mutual consent and is generally easy to establish.
• Partnerships have the advantage of sharing profits, increased capital resources, and collective decision-making.
• Partners are liable for the actions of their co-partners, and the partnership is easy to dissolve.
• If the partnership is unable to pay its debts, the general partners' personal assets can be used to cover those debts.
• Partnerships can be classified based on duration:
  • Partnership at will: Terminated at the will of the partners.
  • Partnership for a specific period: Exists only for a predetermined term.
• Partnerships can also be classified based on partner roles:
  • Capitalist Partner: Contributes capital (money or property) and is not exempt from losses.
  • Industrial Partner: Contributes industry or skills, cannot engage in business independently, and is not liable for partnership losses.
  • Capitalist-Industrial Partner: Contributes both capital and industry.
  • General Partner: Liable beyond their contribution and is responsible for the partnership's debts.
  • Limited Partner: Liable only to the extent of their contribution.

Corporation

• A corporation is an artificial being created by operation of law with a right of succession.
• It has express and implied powers and is managed by a board of directors for stock corporations or a board of trustees for non-stock corporations.
• Corporations have the advantage of legal personality, transferable shares, centralized management, limited liability, and perpetual existence.
• Disadvantages of corporations include complicated formation, government regulation, and potential for internal conflict.
• A one-person corporation (OPC) can only be formed by a natural person, trust, or estate.
• The single stockholder in an OPC is the sole director and president.
• Corporations that cannot be incorporated as OPCs include:
  • Banks and quasi-banks
  • Preneed providers (funeral industry)
  • Trust and insurance companies
  • Public and publicly-listed companies
  • Non-chartered government-owned and controlled corporations

Sole Proprietorship

• The oldest and simplest form of business enterprise.
• The sole proprietor is personally liable for all the debts and obligations of the business.
• Advantages include sole enjoyment of profits, low capitalization, ease of starting and stopping the business, and less complicated taxes compared to corporations.
• Disadvantages include personal liability, sole decision-making responsibility, and limited ability to raise capital.

Contract of Sale

• A contract of sale is perfected by mere consent of the buyer (vendee) and seller (vendor).
• Ownership of the property is transferred to the buyer upon delivery of the thing sold in an absolute sale.
• Ownership remains with the vendor until full payment in a conditional sale.
• The Recto Law (RA 6652) governs installment sales of personal property.
• Implied warranties are inherent in a contract of sale, including:
  • Warranty against eviction: The buyer enjoys legal and peaceful possession of the thing.
  • Warranty against hidden defects: The thing is free from concealed faults or defects.
• Certain parties are not liable for breaches of warranty, such as:
  • Sheriff's sales
  • Auctioneers
  • Mortgagees
  • Pledgees
  • Persons selling with authority in fact or law.

Fiduciary Nature of Partnership

• Partnerships are based on trust and confidence.
• Delectus personae principle: No one can become a partner without the consent of all partners.
• Dissolution of a partnership refers to changes in the partners' relationship.
• Dissolution of a corporation involves the extinguishment of the corporate franchise and its existence.