Partnership Theories in the Philippines
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Questions and Answers

What distinguishes a limited partnership from other partnership types?

  • It operates with personal liability for all partners.
  • It requires at least one general partner who has personal liability. (correct)
  • It must have at least two active partners.
  • It can have only silent partners.

Which type of partner is known for being inactive while also having their name included in the partnership?

  • Silent Partner (correct)
  • Dormant Partner
  • Liquidating Partner
  • Secret Partner

What is a characteristic of a 'partnership at will'?

  • It lasts as long as partners agree to remain together. (correct)
  • It has a predetermined duration.
  • It must involve an active management team.
  • It requires a legal agreement to dissolve.

Which partner type is actively involved in the business but is not publicly recognized as a partner?

<p>Secret Partner (B)</p> Signup and view all the answers

Which of the following is NOT a requirement for forming a partnership?

<p>Involvement of all general partners (B)</p> Signup and view all the answers

What is one of the main distinguishing factors of a partnership?

<p>Each partner has their own equity account (D)</p> Signup and view all the answers

Which of the following is an advantage of forming a partnership compared to a sole proprietorship?

<p>Combines special skills and expertise (C)</p> Signup and view all the answers

What is a disadvantage of a partnership compared to a corporation?

<p>Higher personal liability for debts (B)</p> Signup and view all the answers

What does mutual contribution in a partnership refer to?

<p>Partners bringing in resources and skills (B)</p> Signup and view all the answers

How does the juridical personality of a partnership differ from that of its partners?

<p>The partnership can enter contracts independently (A)</p> Signup and view all the answers

Which of the following statements accurately describes a partnership's stability compared to a corporation?

<p>Partnerships can be easily dissolved (A)</p> Signup and view all the answers

What is a potential downside of mutual agency in a partnership?

<p>It can create personal obligations for partners (B)</p> Signup and view all the answers

In what way can partnerships be more effective than corporations?

<p>More informal and personal relationships among partners (A)</p> Signup and view all the answers

What is required for a corporation to be formed that is not necessary for a partnership?

<p>Approval by the SEC (C)</p> Signup and view all the answers

In what way do partnerships differ from corporations regarding management?

<p>Partners can either manage the partnership or appoint managers. (C)</p> Signup and view all the answers

What characterizes the liability of partners in a partnership?

<p>Unlimited liability to the extent of personal assets (A)</p> Signup and view all the answers

Which of the following accurately describes the existence of a partnership?

<p>Partnerships can be dissolved at any time by the partners' agreement. (D)</p> Signup and view all the answers

What is the impact of income taxes on partnerships compared to corporations?

<p>Partnerships are subject to corporate tax, while corporations may have different tax rules. (C)</p> Signup and view all the answers

What signifies the commencement of juridical personality for partnerships?

<p>Approval by the SEC (D)</p> Signup and view all the answers

What defines a Universal Partnership of All Present Property?

<p>Partners contribute money, property, and industry to a common fund. (D)</p> Signup and view all the answers

What does the term 'mutual agency' refer to in the context of partnerships?

<p>Each partner can represent the partnership in business dealings. (B)</p> Signup and view all the answers

Which type of partnership is considered illegal or unregistered?

<p>De Facto Partnership (D)</p> Signup and view all the answers

How does the concept of succession differ between partnerships and corporations?

<p>There is no right of succession in partnerships, while corporations can last indefinitely. (D)</p> Signup and view all the answers

What characterizes a Limited Partner in a partnership?

<p>Is only liable to the amount they contributed. (D)</p> Signup and view all the answers

Which statement accurately represents General Partners?

<p>They have unlimited liability and can lose personal assets. (D)</p> Signup and view all the answers

Which form of partnership involves only sharing profits without co-owning assets?

<p>Universal Partnership of Profits (A)</p> Signup and view all the answers

What is the main requirement for a De Jure Partnership?

<p>Must comply with SEC regulations for establishment. (C)</p> Signup and view all the answers

What best describes an Industrial Partner?

<p>Contributes skills or labor, enhancing the partnership’s capabilities. (A)</p> Signup and view all the answers

Which type of legal classification of partnerships indicates that they are fully compliant with the law?

<p>De Jure Partnership (B)</p> Signup and view all the answers

Flashcards

Partnership (definition)

A contract where two or more people agree to pool money, assets, or work to share profits.

Partnership characteristics (mutual contribution)

Partners contribute money, property, or talent to a common business fund.

Profit or Loss Sharing (partnership)

The agreement to divide profits or losses according to the terms of partnership.

Partnership vs. Sole Proprietorship

Partnership has more financial backing and shared expertise.

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Partnership vs. Corporation (organization)

Partnerships are easier to form but less stable than corporations (compared).

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Partnership – personal obligations

Partners in a partnership may have personal responsibility for business debts (unlimited liability).

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Partnership – raising capital

Partnerships may struggle to raise large amounts of capital compared to corporations.

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Partnership – advantages (compared to sole proprietorship)

Partnerships combine financial resources, skills, and decision-making freedom.

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Partnership Formation

A partnership is created by agreement, unlike corporations which require legal approval.

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Partnership's Juridical Personality

A Partnership only gains legal standing (juridical personality) after approval by the relevant authority.

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Partnership's Limited Life

A partnership can end when the partners decide to dissolve it.

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Partnership Liability

Partners in a partnership have unlimited personal liability for business debts.

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Partnership Management

Partners can manage a partnership themselves or appoint others, unlike corporations where a board manages.

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Number of Partners

A partnership typically involves two or more people, while corporations may require more.

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Partnership Co-ownership

Assets contributed to a partnership are typically co-owned by the partners.

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Partnership Mutual Agency

In a partnership, any partner can act on behalf of the partnership as an agent.

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Universal Partnership of All Present Property

Partners pool money, property, and effort into a shared fund; profits divided based on agreement.

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Universal Partnership of Profits

Partners share only profits, not the underlying assets used to generate those profits.

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Particular Partnership

Partnerships focused on a specific project or business (e.g., professional services).

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De Jure Partnership

Legally recognized partnership, complying with all necessary requirements.

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De Facto Partnership

Partnership not fully registered or legally compliant; still considered a partnership under the law.

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General Partner

Partner with unlimited personal liability for the partnership's debts.

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Limited Partner

Partner with limited liability, only responsible up to their investment.

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SEC Approval Term

A newly approved corporation has a 50-year term (renewable) after SEC approval.

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Limited Partnership

A partnership where some partners have limited liability, while at least one has unlimited liability.

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Dormant Partner

A partner who does not actively participate in the business and isn't publicly known as a partner.

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Fixed-Term Partnership

A partnership with a predetermined ending date, often for a specific project.

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General Partner

In a limited partnership, the partner with unlimited liability for the business debts.

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Silent Partner

A partner who is not active but whose participation in the partnership is known by others.

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Study Notes

Partnership Theories

  • Partnership (Philippines): A contract where two or more individuals agree to contribute money, property, or labor to a common fund, intending to divide profits. It can be for the practice of a profession.
  • Juridical Personality: Partnerships have a separate legal existence distinct from its members, even if legal formalities aren't met.
  • Characteristics:
    • Mutual Contribution (money, property, or industry).
    • Division of Profits/Losses: Profits and losses are shared among partners.
    • Co-ownership of Contributed Assets: Partners jointly own assets brought into the partnership.
    • Mutual Agency: Partners act as agents for the partnership, binding it in transactions.
    • Limited Life: Partnership ends when partners discontinue it.
    • Unlimited Liability: Partners are personally liable for partnership debts.
    • Income Taxes: All partnerships (except professional partnerships) face corporate tax.

Advantages of a Partnership (compared to a sole proprietorship)

  • Greater Financial Capability: Combined resources of partners.
  • Combined Skills & Expertise: Diverse talents in the partnership.
  • Flexibility & Decision-Making: Ease and speed in decision-making.
  • Lower Organization Costs: Less expensive to set up than some other business structures.

Disadvantages of a Partnership (compared to a corporation)

  • Instability: Dissolution is easier than for a corporation.
  • Unlimited Liability: Partners personally liable for business debts.
  • Limited Capital: Raising funds is harder than for some other business structures.

Partnership vs. Corporation

  • Formation: Partnership is formed by agreement, while corporations require legal approval (SEC).
  • Number of People: A corporation can be formed with a minimum of one person (OPC). Partnerships must have at least two people.
  • Juridical Personality: Partnership's juridical personality depends on registration. Corporations receive juridical personality upon receiving corporate charter from SEC.
  • Management: Partners typically manage the partnership while corporations have a board of directors.
  • Liability: Partner's liability in general partnerships is unlimited, while corporate shareholders are typically limited to the amount of their investment.

Classification of Partnerships

  • Object:

    • Universal Partnership of All Present Property: All partners contributing property.
    • Universal Partnership of Profits: Only profits are shared.
    • Particular Partnership: Partners agree to share in profits from certain activities.

  • Liability:

    • General Partnership: Partners have unlimited liability.
    • Limited Partnership: Some partners have limited liability. (e.g., limited partners)

  • Duration:

    • Partnership with fixed term (time period) or a particular undertaking..
    • Partnership at Will: Exists until partners decide to end.

  • Purpose: Commercial/Trading (e.g., manufacturing), versus Professional (e.g., professional services).

  • Lawfulness: De Jure (registered and legal) or De Facto (not registered but treated as legal).

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Partnership Theories PDF

Description

Explore the crucial aspects of partnership theories specific to the Philippines. This quiz covers definitions, characteristics, and advantages of partnerships as legal entities. Test your understanding of how partnerships function and their implications for individuals involved.

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