Partnership Law Overview
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Questions and Answers

Which type of partnership is recognized as legally established by meeting all legal requirements?

  • Universal partnership
  • Partnership de jure (correct)
  • Open partnership
  • Partnership de facto

Who is a partner that does not participate actively in the business but is recognized as a partner by others?

  • Silent partner (correct)
  • Dormant partner
  • Secret partner
  • Ostensible partner

Which of the following statements about a partner's rights is correct?

  • Both statements are incorrect
  • Both statements are correct (correct)
  • Only the second statement is correct
  • Only the first statement is correct

Which of the following is not a requirement for a partner’s admission or representation to be considered as evidence against the partnership?

<p>The admission must be made in judicial proceedings. (B)</p> Signup and view all the answers

Which of the following is NOT an inherent limitation of taxation?

<p>Government exemption. (D)</p> Signup and view all the answers

Which statement about corporations is false?

<p>A corporation is fully protected against searches and seizures. (B)</p> Signup and view all the answers

What is an element of the doctrine of 'piercing the veil of corporate entity'?

<p>All of the foregoing. (A)</p> Signup and view all the answers

Which of the following is NOT a function of Congress concerning taxation?

<p>Collect the tax levied under the law. (B)</p> Signup and view all the answers

In which situation will the doctrine of 'piercing the veil of corporate entity' not be applied?

<p>When a corporation controls majority stock in another corporation. (B)</p> Signup and view all the answers

What term describes the transfer of the tax burden by one whom the tax is assessed to another?

<p>Shifting. (C)</p> Signup and view all the answers

Which aspect is uncharacteristic of rehabilitation proceedings under the Rules of Procedure on Corporate Rehabilitation?

<p>There is no requirement for creditor notification. (A)</p> Signup and view all the answers

Which of the following statements regarding tax and debt is accurate?

<p>True, False. (A)</p> Signup and view all the answers

Which of the following correctly describes a dormant partner?

<p>A partner known to third parties but not involved in management. (B)</p> Signup and view all the answers

Which government agency is NOT tasked with the implementation of tax laws in the Philippines?

<p>Philippine National Police. (D)</p> Signup and view all the answers

Which theory in taxation suggests that without taxes, a government would be paralyzed and unable to function?

<p>Lifeblood theory. (A)</p> Signup and view all the answers

Which of the following is not considered a source of tax laws?

<p>Opinion of law luminaries. (D)</p> Signup and view all the answers

Which type of corporation can engage in both deep sea fishing and operate an ice plant as a public service operator?

<p>A corporation engaged in fisheries (B)</p> Signup and view all the answers

Which of the following attributes is not common to both a corporation and a partnership?

<p>Income tax rate (D)</p> Signup and view all the answers

What type of partnership focuses on specific undertakings or the use of determinate things?

<p>Particular partnership (C)</p> Signup and view all the answers

Under what condition may a corporation be a partner in another corporation?

<p>If the articles of incorporation expressly allow it (D)</p> Signup and view all the answers

Which of the following is not a feature of preferred stock?

<p>It requires a minimum investment before issuance. (B)</p> Signup and view all the answers

Which statement related to a corporation is false?

<p>All incorporators are stockholders (B)</p> Signup and view all the answers

What remedy can injured partners seek if a capitalist partner engages in competing business without permission?

<p>To ask the guilty capitalist partner to bring any profits to the common fund. (D)</p> Signup and view all the answers

What type of liability do partners have for partnership contracts when all assets are exhausted?

<p>Solidary. (A)</p> Signup and view all the answers

Which of the following does not qualify as a feature of 'authorized capital stock'?

<p>It may consist of retained earnings (D)</p> Signup and view all the answers

Which statement is true regarding shares of stock?

<p>It is an incorporeal right (B)</p> Signup and view all the answers

Which statement regarding the nature of partnerships is true?

<p>A partnership can be inferred from the sharing of profits. (C)</p> Signup and view all the answers

Which characteristic differentiates a limited partner from other types of partners?

<p>Limited partners typically do not partake in managing the business. (D)</p> Signup and view all the answers

Which of the following is not a feature of preferred stock?

<p>It must always be a par value stock (A)</p> Signup and view all the answers

What distinguishes a corporation from a partnership?

<p>A corporation acquires juridical personality upon approval by the SEC. (A)</p> Signup and view all the answers

Which statement about de jure and de facto corporations is false?

<p>A de facto corporation exists without any legal compliance. (B)</p> Signup and view all the answers

Which of the following is true regarding preferred stock?

<p>Preferred stock generally has priority over common stock for dividends. (D)</p> Signup and view all the answers

Under which principle can Mr. X not be made liable for the mortgage shortfall?

<p>Limited Liability Principle (C)</p> Signup and view all the answers

What is the maximum duration allowed for the existence of a corporation under the Revised Corporation Code?

<p>Perpetual existence (D)</p> Signup and view all the answers

What is the due date for the 1st quarter income tax return of an individual deriving income from business or profession?

<p>April 15 of the same taxable year (D)</p> Signup and view all the answers

What is the minimum paid-up capital requirement for a corporation with an Authorized Capital Stock of P64,000 under the Revised Corporation Code?

<p>P4,000 (B)</p> Signup and view all the answers

Where must a restriction on the transfer of shares in an ordinary stock corporation be indicated?

<p>By-Laws (C)</p> Signup and view all the answers

Which of the following is NOT a characteristic of income tax?

<p>Indirect (D)</p> Signup and view all the answers

What is the capital gains tax on the sale of Edwin Nola's principal residence?

<p>P900,000 (A)</p> Signup and view all the answers

When does the existence of a corporation sole officially begin?

<p>Filing of the verified articles of incorporation (A)</p> Signup and view all the answers

What is Broget's taxable income during the year given his various income sources?

<p>P35,000 (A)</p> Signup and view all the answers

Which of the following is NOT a qualification of a director?

<p>They must have prior experience in corporate management (C)</p> Signup and view all the answers

What is the taxable income of Mr. Beltran for the taxable year ended December 31, 2023?

<p>P5,875,000 (C)</p> Signup and view all the answers

In a cumulative voting system, how many votes can stockholder A cast in favor of candidate B if A holds 10,000 shares?

<p>50,000 votes (A)</p> Signup and view all the answers

Who fills the vacancy in the Board of Directors when a member dies or retires?

<p>Stockholders in a called meeting regardless of director quorum (C)</p> Signup and view all the answers

What is the taxable income of Mrs. Beltran?

<p>P3,235,000 (C)</p> Signup and view all the answers

How much was Broget's total income before deductions?

<p>P300,000 (C)</p> Signup and view all the answers

What is the nature of the investment made by Mr. X in exchange for shares?

<p>Property exchange (A)</p> Signup and view all the answers

Flashcards

Partnership de jure

A partnership that legally meets all the requirements for its establishment.

Secret partner

A partner who isn't publicly known as a partner in the business.

Partner's right in specific partnership property

A partner's claim to partnership assets, which is not freely assignable unless other partners consent.

Corporate legal personality

A corporation is treated as a separate legal entity from its owners (shareholders).

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Piercing the corporate veil

A legal principle that allows courts to disregard the corporate structure and hold the owners personally responsible for the corporation's debts or actions.

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Piercing the veil: control and fraud

Complete control over the corporation and is used for fraud or wrongdoing is a reason to pierce the corporate veil.

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Corporate rehabilitation proceedings

Legal procedures to help struggling corporations, partnerships, and associations recover and continue operating.

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In rem proceedings

Legal proceedings affecting the property itself, rather than the individuals involved.

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Corporate Purpose

The specific business activities a corporation is legally allowed to engage in, as outlined in its charter.

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Ultra Vires Act

An act performed by a corporation that falls outside the scope of its stated purpose, as defined in its charter.

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Partnership by Estoppel

A situation where people are treated as partners, even if they were not formally partners, because they held themselves out as partners to the public.

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Characteristics of preferred stock

Preferred stock doesn't automatically give voting rights, dividend priority may not always be guaranteed, and it might or might not have a par value. It can be redeemed.

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Partner remedies for capitalist partner misconduct

If a capitalist partner does business outside the partnership without permission, the other partners can demand the profits or bear losses.

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Partner liability when assets are exhausted

If a partnership's assets aren't enough to cover debts, all partners are jointly and severally liable (solidary).

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Gross returns and partnership

Sharing gross returns alone does not automatically create a partnership.

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Limited partner exceptions

A limited partner can be an ostensible, named, or silent partner; but cannot be a managing partner.

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Partnership vs. corporation

A partnership is created by agreement, doesn't have independent legal personality, and lacks continuity after a partner leaves. A corporation is formed by law and has perpetual succession.

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De jure vs. de facto corporation

A de jure corporation completely satisfies legal requirements for formation, while a de facto corporation only substantially, but not perfectly, complies.

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Corporation property representation

Corporate property represents the corporation itself, and ownership vests upon the corporation.

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Limited Liability Principle

This principle protects shareholders from personal liability for the debts and obligations of a corporation. They are only liable up to the amount of their investment.

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Corporate Entity Theory

This theory states that a corporation is a separate legal entity from its owners, with its own rights, liabilities, and responsibilities.

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Maximum Existence of a Corporation

A corporation under the Revised Corporation Code has a standard maximum existence of 50 years, which can be extended by renewal not earlier than 3 years before the expiry of the initial term.

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Minimum Paid-Up Capital

Under the Revised Corporation Code, corporations need to have a minimum paid-up capital to incorporate. This requirement is determined by the corporation's authorized capital stock.

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Restrictions on Transfer of Shares

This restriction must be explicitly mentioned in both the Articles of Incorporation and the By-Laws of a corporation.

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Existence of a Corporation Sole

A corporation sole's existence formally begins from the date its verified articles of incorporation are filed, although it might have come into agreement before this.

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Qualifications of a Director

Directors must meet certain minimum qualifications, which include owning at least 1% of the shares and not being disqualified under the Corporation Code.

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Income tax return filing deadline

The due date for individuals with business or professional income to file their first-quarter income tax return is on or before April 15th of the same taxable year.

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Income tax characteristics

Income tax is a national, general, and ad valorem tax. It is not indirect.

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Capital gains tax

The capital gains tax on the sale of a principal residence is calculated based on the difference between the selling price and the cost of the residence. However, the tax is capped at P6,000,000.

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Taxable income from employment

Taxable income from employment includes wages, salaries, 13th-month pay, overtime pay, night shift differentials, hazard pay, and holiday pay. However, the statutory minimum wage is not taxed.

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Taxable income for professionals

A professional’s taxable income is calculated by subtracting business expenses from their total income, including professional fees and rental income (net of withholding tax).

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Investment income

Income from investments, such as shares of a corporation, is generally taxable.

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Taxable income for spouses

The taxable income of married couples is determined by combining their individual incomes. This includes salaries, bonuses, professional fees, rental income, and other sources of income.

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Withholding tax

Withholding tax is deducted from income before it is received by the individual. This helps ensure that taxes are paid throughout the year.

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Partner's Admission as Evidence

An admission made by a partner about partnership affairs can be used as evidence against the partnership. This admission must be made within the scope of the partner's authority, while the partnership is still active.

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Inherent Limitation of Taxation

A limitation on the power to tax that is inherent in the concept of taxation itself, such as the requirement that taxes must be for public purposes.

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Congress's Role in Taxation

Congress establishes the laws defining taxes, who should pay, and the amounts.

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Tax Shifting

The transfer of the tax burden from the person or entity initially assessed to another. For example, a business might raise prices to pass on a tax to consumers.

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Tax and Debt Offsetting

Taxes and debts can be used to offset each other.

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Tax Payable in Money

Taxes are typically paid with money, not goods or services.

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Lifeblood Theory of Taxation

This theory emphasizes the essential nature of taxes for the government to function. Without taxes, the government would lack the resources to operate and would essentially be paralyzed.

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Sources of Tax Laws

Tax laws are primarily drawn from the Constitution, statutes, and judicial decisions. Opinions of legal experts are not considered a formal source.

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Study Notes

Partnership Law

  • Partnership establishment: A partnership "de jure" complies with all legal requirements for a lawful establishment.

  • Partner types: A "silent partner" is not actively involved in the business but may be known to third parties. A "dormant partner" is both silent and unknown. An "ostensible partner" appears to be a partner to third parties, even if they aren't.

  • Partnership property: Partners are co-owners of specific partnership property. A partner's right in such property is assignable with consent.

  • Corporate law:

    • Corporations have separate legal personalities from their shareholders.
    • Corporations can be awarded moral damages if their reputation is harmed.
    • Corporate shareholder interests aren't directly tied to corporate assets.

  • Piercing the corporate veil: Elements include complete control, control used for fraud, and control being the proximate cause of harm. Corporations will not have their veil pierced under certain conditions.

  • Rehabilitation proceedings:

    • Corporate, partnership, and association proceedings are non-adversarial.
    • Jurisdiction is initiated upon proceeding commencement.
    • Proceedings are summary and in rem.

  • Stockholder preemptive rights: A right to buy new shares before they are offered to others can be denied in particular cases, such as in ensuring a minimum ownership threshold.

  • Partnership vs Corporation:

    • Partnerships are created by agreement, while corporations are established by law with approval from the SEC and a certificate.
    • Partnerships often have unlimited liability.
    • Corporations often have limited liability..

Corporate Law

  • Limited Partner: A limited partner is generally not an ostensible or managing partner.

  • Profit Distribution: In distributing partnership profits, priority is given to agreements on profit distribution over agreements on loss distribution; this takes priority over capital contributions and equal distribution.

  • Corporate Officers: The term of a corporate president is not necessarily the same as a board director's term, and the president could be Treasurer or Secretary.

  • Corporate Board Vacancies: Vacancies in a board of directors can be filled by the majority vote of the board, or, in specific instances, by the majority vote of shareholders at a meeting.

  • De Facto Corporation: A de facto corporation is created when there's a good faith effort to comply with incorporation laws, even if some technical aspects aren't followed.

  • Corporate Existence: Corporate existence is defined by the articles of incorporation, often with a fixed or indefinite term.

  • Stockholders: Duly established cooperatives and corporations that primarily hold equities in rural banks can be incorporators. Natural persons can be both stock and non-stock incorporators.

  • Stockholder Equity: Some equity components, such as premium on capital stock and donated capital, are not legal capital.

  • Capital Stock: No-par value stock does not require a fixed value assigned to the shares..

  • Stock Valuation: Market value, Liquidating value, and book value are used to determine stock value.

  • Legal Capital. Some equity components, such as premium on capital stock and donated capital, are not legal capital.

  • Preferred Stock: Certain preferred stock shares may participate in any additional profits or losses in the partnership beyond their already agreed-upon returns..

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Description

This quiz covers key principles of partnership law, including partnership establishment, types of partners, and partnership property. It also delves into corporate law, highlighting the separation of corporate entities and concepts such as piercing the corporate veil. Test your knowledge of these important legal concepts.

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