Partnership: Definition, Nature, and Requisites

Partnership Definition

• An agreement where two or more individuals commit to provide money, property, or industry to a shared fund, aiming to distribute the profits among themselves.

Nature of Partnership

• A partnership is both a contract and a business organization.
• It is consensual, principal, and bilateral/multilateral

Partnership Agreement

• It is not an aleatory contract as it doesn't depend on chance, luck, or uncertain outcomes
• It exists upon the execution of the partnership agreement by the partners.

Partnership Requisites

• Established for the common benefit of members, which means to earn and divide profits.
• There must be mutual contribution of money, property, or industry to a common fund.
• It must have a lawful object or purpose

Partners

• May be a natural person, another partnership, or a corporation
• Delectus personae/personarum allows a person to choose whom they want to associate with in a partnership.

Contributions

• Can be money, tangible property, or intellectual/manual industry but not political connections or credit.

Prima Facie Evidence of Partnership

• Receiving a share of the net profits of a business.

Secret Associations

• Voluntary associations or societies where the articles are kept secret and members transact in their own names are governed by the provisions on partnership, but are not considered to have juridical personality.

Co-ownership

• Does not constitute a partnership by itself.
• Sharing profits from co-owned property doesn't automatically create a partnership.

Real Estate Brokers Example

• Sharing office space and resources doesn't automatically make Sanchez and Suarez partners, if there is no partnership agreement between them.
• Only Sanchez is liable for the laptop computer purchase, as it was a personal transaction.

Belinda, Cristina, and Sophia

• No partnership exists between Belinda, Cristina, and Sophia regardless of Belinda's obligations.

Buds and Blossoms

• Beatriz and Bethliz, the business operators are the partners.
• Oprah the lessor, and Amalia the account hired at a fixed rate are not partners

Olivia, Teresa, and Carmela

• Carmela can pursue Teresa alone being a sole proprietor
• Teresa's partnership with Olivia, however may open Olivia up to be a partner as well.

Unlawful Partnerships

• An unlawful partnership that constitutes a crime results in the partnership being void.
• Proceeds and instruments are confiscated, and partners may face criminal prosecution.

Immovable Property Contribution

• If immovable property or real rights are contributed, the partnership contract must be in a public instrument.
• It needs an attached inventory of the immovable property signed by the parties.
• Failure to do so does not affect ownership.

Capital Contribution

• If the capital is P3,000 or more, it must be in a public instrument recorded with the SEC
• Failure to comply doesn't affect the partnership's juridical personality.

Limited Partnerships

• A certificate must be signed and sworn to by the partners and recorded with the SEC.
• Failure to to so makes the partnership a general partnership.

Public Instrument and Inventory

• Required for a general partnership when the capital contribution includes immovable property.
• For example, with P100,000 cash and a vacant lot worth P50,000, making a total of P150,000.

Universal Partnership of All Present Property

• Requires all partners to contribute all their current properties to a common fund to be divided, along with any profits acquired.

Partnership Property

• Property inherited before the partnership, but crops harvested, a fishpond donated, and fish harvested during the partnership, belong to the partnership.

Universal Partnership of Profits

• Comprises all that the partners may acquire by their work or industry during the existence of the partnership.
• Salary received by a professor, or a lotto prize is included, but a coconut plantation inherited before is not.

Partnership Type

• A universal partnership of all profits is entered into if there is no specification as to its nature.

Disqualification

• Those guilty of adultery or concubinage are allowed to form a universal partnership

Valid Partnership Contract

• A partnership between a husband and wife for the exercise of a profession is valid.

Hubert and Wendy

• When they formed a partnership and then married two years later, the marriage dissolved the universal partnership they earlier formed

Particular Partnership

• One which has for its object determinate things, their use of fruits, or specific undertaking, or the exercise of a profession.

Particular Partnership Examples

• An auditing firm composed of CPAs is a particular partnership.
• A partnership formed for the purpose of selling all the lots in a certain subdivision is a particular partnership also.

General Partnership

• A partnership where all the partners are general partners who are liable to the extent of their separate property.

Limited Partnership Requirements

• If a partnership has six partners, it's enough that at least one is a limited partner and one is a general partner.

General vs Limited Partner

• A general partner may contribute money, property, and/or services.
• A limited partner may contribute money and/or property, but not services
• A general partner may be either a capitalist or industrial partner

Limited Partner in Internet Cafe

• Jessica, who is an expert, will be the general partner, contributing expertise.
• Sienna, who contributes the funds and property, will be the limited partner.

General Partners

• Jessica and Sienna can both be general partners, even if they are sisters.

Ostensible Partner

• Is active and known to the public as a partner, such as by allowing his name to be included in the firm name.

Nominal Partner

• Is not actually a partner but may become liable as such to third persons.

Silent Partner

• One who has no voice or active part in the management of the business of the partnership, however they may have a share in the profits

Secret Partner

• One who does not participate in the management of the business of the partnership and is not known to the public as a partner.

Dormant Partner

• Has no voice or active part in the management of the business of the partnership but shares profits and losses.
• They may be known to the public as a partner.

Partnership Evaluation

• An limited partner can be a general partner at the same time.

Joint/Particular Partnership

• A general partnership may not be a limited partnership at te same time although it may be a joint/particular one.

Partnership at Will

• If its business is continued upon the expiration of the five-year period.
• Also formed when partners did not agree on a definite term or a specific undertaking.

Partner Obligations

• To deliver to the partnership at the time it was constituted or on the date stipulated the property he has promised to contribute.
• To take care of the property before its delivery to the partnership with the diligence of a good father of a family.
• To answer for eviction in case the partnership is deprived of the property he has contributed

Incorrect Statement

• Herbert being the husband and head of the family shall be the manager.

Debt Payment Application

• D gives X P4,000.00 informing X that the amount is in payment of his debt to the latter, the remainder will be applied to XYZ company proportionately.
• D owes X P4, 000.00, which is interest bearing. For debt payment, it should be applied to X due to the interest rate.
• Credit will be applied to X because that credit is due earlier.
• Z (authorized to collect credits) gets P4,000, it is applied proportionately to X and XYZ Company.

HOT Company Payment

• Hornilla, who collected the amount, should bring it to the partnership so Ortaleza and Tanchangco may share in it.

New Partner

• A newly-admitted partner is liable for partnership debts incurred after their admission whether a stipulation exists.

Partner Losses

• Losses of things only the use and fruits of which were contributed by a partner for the common benefit are borne by the partner concerned.

Valid Stipulations

• A stipulation excluding an industrial partner from profits is valid

Voting

• The group of Bernardo, Antonio and Renato will prevail because they constitute the majority of the managing partners.
• If a resulting tie occurs, the votes of those who own the controlling interest will determine what is binding on the other partners.

Managers

• All partners will be managers if no agreement of who should be the manager is put into place

Partnership Conflict

• If a vote occurs, The Group of Simon, Troy, Ariel and Roger will prevail because they constitute the majority.
• If the voting result causes a tie, Benny, Oscar and Xavier will prevail because they own the controlling interest.

WINDY Company

• Only contract II is considered approved.

Partner Associates

• A partner may associate another person with him in his share with or without the consent of the other partners.

Assignee Rights

• The assignee of a partner's interest may receive his assignor's share of the profits.

Partner Assignment

• Palma, can not convey his interest to Toledo without Plaza's consent.

Effects of Assignment

• The assignee can not participate in the management of the partnership.

Partnership Property

• The following statements are false.
• A partner, being a co-owner of specific partnership property, has an equal right to possess such property for other than the partnership purpose.
• A partner's right in specific partnership property is subject to legal support.

Partner Rights

• A partner's right in specific partnership property may not be attached by his separate creditors.
• A partner's right in specific partnership property may not be assigned by him for his separate debts.

Only Statement II is true.

• When such interest is charged, the same may be redeemed with separate property of any one or more of the partners, or with partnership property, by any one or more of the partners, with the consent of all the partners with interest are not so charged or sold.

False Names

• Zander may not include his name in the partnership firm name, as he is not a partner, therefore the creditors cannot go after the separate assets of Alexander Cruz

Exemption

• A stipulation exempting a capitalist partner from liability to third persons is valid only among the partners, but is void as to third persons.

BRAVO Enterprises Liabilities

• The unpaid liabilities of P40, 000.00 will be paid equally by Rowena, Armida, Violeta, and Olivia at P10,000.00 each with no right to reimbursement on the part of Olivia.

The remaining liability of P30,000.00 for ACME Enterprise

• Alonso, none; Cortes, P18, 000.00; Malvar, P12, 000.00; Elnora, none

CARE Company Management

• As the partners failed to agree on who shall manage the partnership, All the partners will be considered the managers or agents of the partnership.

Manager Designations

• Purchase of a delivery van by Ambrosio is not binding on the company.
• The seller was not aware that Ambrosio had no authority to purchase a van for the partnership.

GREAT Enterprises Statement

• I and III are false
• Trina may not engage in the auto supply business without the consent of the capitalist partners since it is a business that is of a kind different from the partnership business.
• In case of profits, Trina will be given an equitable share thereof, and the balance will be divided among Grace, Rose, Elma, and Aida equally, since they have no profit sharing agreement.

Usual Business Acts

• All of the following indicate that the act is not for apparently carrying n in the usual way the business of the partnership.
• Assigning the partnership property in trust for creditors or on the assignee's promise to pay the debts of the partnership.
• Entering into a compromise concerning a partnership claim or liability.
• Renouncing a claim of the partnership.

Conveyance

• The conveyance by A to X passed the equitable interest in the parcel of land to X.

Knowledge of a Partner

• The following concerning notice and knowledge of a partner is knowledge of the partnership:
• Notice to any partner
• Knowledge of a partner acting on a particular matter obtained by him while already a partner

Termulo's Account

• Excellent Company was not successful because he was not the partner acting on the particular matter.

Obligation of Partnership

• I- solidary (partners and partnership); II- joint (partners)

Damages

• DOW Enterprises and Damortiz may be held solidarily liable by Campos.

Liability

• All the partners and partnership solidarily.

Partnership by Estoppel

• When a person represents himself as a partner in a non-existing partnership.

A, B, C and Z

• The assets of X Enterprises shall first be exhausted.
• Thereafter, A, B and D may be held liable by Z from their separate assets at P7,500.00 each.

Loan obligation

• Against the partnership for its assets of P60,000.00.
• Thereafter, Z can go after A, B and D at P10,000.00 each for the balance of P30,000.00.

True Statement

• Partnership creditors shall be preferred to those of each partner as regards the partnership property regardless of the amounts of claims.

Automatic Dissolution

• Insolvency of a partner does not cause the automatic dissolution of a general partnership.

Authority to Act

• Terminated among the partners but not terminated with respect to Ramos

Not Dissolved

• The authority to act is terminated among the partners but not with respect to Palanza

Following Statements

• I and II are true
• A limited partnership is one composed of at least one limited partner and at least one general partner.
• A limited partner may contribute money or property but not services.

The statement is true with respect to

• If it follows that the three are true, all statements apply.
• A limited partner is liable as a general partner
• If he is also a general partner
• If he participates in the management of the partnership.
• If he allows his surname to be included in the partnership name.

Following Acts

• Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a limited partner.

Entitled to

• Either a or b, or both a and b
• Grant a loan to the partnership
• Transact business

Limited Partner

• Both statements are true.
• A limited partner cannot receive or hold as collateral security any partnership property
• A limited partner cannot receive from general partner or the partnership any conveyance or release from liability, if partnership assets are not sufficient to discharge partnership liabilities to outside creditors.

Automatic Dissolution

• Civil interdiction of a limited partner does not cause an automatic dissolution

Following Statements

• Both statements are true
• As a rule, a limited partner is not a proper party to proceedings by or against a partnership
• A limited partner may, however, be a proper party if the object of the proceeding is to enforce a limited partner's right against the partnership or a limited partner's liability to the partnership.