Partnership vs. Corporation Quiz

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is a key advantage of a partnership compared to a corporation?

  • Unlimited liability for all partners
  • More formal management structure
  • Easier and less expensive to organize (correct)
  • Greater ability to raise large amounts of capital

What is one disadvantage of a partnership?

  • Easily dissolved and thus unstable (correct)
  • Higher costs of operation than a corporation
  • More personal and informal structure
  • Limited decision-making flexibility

How is a partnership created?

  • Through government regulation
  • By agreement of the partners (correct)
  • By issuing a certificate of incorporation
  • Through a formal board meeting

What is the liability extent for partners in a partnership?

<p>Unlimited, including personal assets (D)</p> Signup and view all the answers

What governs the management structure of a corporation?

<p>A Board of Directors (D)</p> Signup and view all the answers

What is the maximum number of persons allowed in a partnership?

<p>15 (C)</p> Signup and view all the answers

What happens to the right of succession in a partnership?

<p>There is no right of succession (B)</p> Signup and view all the answers

What feature distinguishes a corporation from a partnership in terms of legal personality?

<p>Incorporation by SEC (B)</p> Signup and view all the answers

What type of partnership has a fixed term or is formed for a particular undertaking?

<p>Partnership with a fixed term (A)</p> Signup and view all the answers

Which type of partnership is formed for the transaction of business?

<p>Commercial Partnership (A)</p> Signup and view all the answers

Which type of partnership allows all partners to contribute property and share in the profits acquired from it?

<p>Universal partnership of all present property (D)</p> Signup and view all the answers

What distinguishes a de jure partnership from a de facto partnership?

<p>It has an official registration. (D)</p> Signup and view all the answers

In which type of partnership do the partners have liability only to the extent of their personal contributions?

<p>Limited Partnership (A)</p> Signup and view all the answers

Which partner contributes both property and personal service to the partnership?

<p>Capitalist-Industrial partner (A)</p> Signup and view all the answers

Which type of partner is responsible for winding up the affairs of the partnership after dissolution?

<p>Liquidating partner (A)</p> Signup and view all the answers

What characterizes the object of a particular partnership?

<p>It is based on determinate specific undertakings. (A)</p> Signup and view all the answers

How does a limited partner's liability differ from that of a general partner?

<p>Limited to their capital contribution (D)</p> Signup and view all the answers

Which of the following is a characteristic of a general partnership?

<p>All partners are liable to the extent of their separate properties (D)</p> Signup and view all the answers

What characterizes a partnership at will?

<p>It has no specified term. (A)</p> Signup and view all the answers

What does a universal partnership of profits entail regarding partner contributions?

<p>Profits from all partners' work are included. (D)</p> Signup and view all the answers

In which classification can partners be liable for debts beyond their contributions?

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

Who among the following is primarily responsible for managing the partnership?

<p>Managing partner (A)</p> Signup and view all the answers

What defines a universal partnership of all present property?

<p>All contributions become part of a common fund. (B)</p> Signup and view all the answers

Which characteristic is NOT true for a limited partnership?

<p>General partners are not liable for the debts of the partnership. (A)</p> Signup and view all the answers

What distinguishes a silent partner from a secret partner?

<p>A silent partner does not take part in business operations, whereas a secret partner actively participates but is not publicly acknowledged. (C)</p> Signup and view all the answers

What is the purpose of the Article of Partnership?

<p>It provides a written agreement with essential provisions of the partnership. (B)</p> Signup and view all the answers

Which of the following is true regarding the registration of partnerships with the SEC?

<p>Partnerships with P3,000 or more are valid even if not registered. (C)</p> Signup and view all the answers

How often must CPAs and CPA firms renew their registration?

<p>Every three years (D)</p> Signup and view all the answers

What defines a nominal partner?

<p>A partner who is mistakenly believed to be a partner but has no actual partnership. (C)</p> Signup and view all the answers

What is one of the characteristics of a partnership?

<p>Separate juridical personality (C)</p> Signup and view all the answers

What distinguishes a partnership from a corporation?

<p>Partnerships have unlimited liability for partners (B)</p> Signup and view all the answers

Which of the following is not a characteristic of a partnership?

<p>Fixed and perpetual existence (C)</p> Signup and view all the answers

What is an impact of limited life in a partnership?

<p>It can lead to dissolution upon withdrawal of partners (A)</p> Signup and view all the answers

Which statement about partnership liability is accurate?

<p>Limited partners are only liable up to their contribution amount (A)</p> Signup and view all the answers

Which of the following correctly describes mutual contribution in a partnership?

<p>Mutual contribution can be in the form of assets, skills, or labor. (D)</p> Signup and view all the answers

What is the main advantage of a partnership compared to a sole proprietorship?

<p>Enhanced financial capabilities through combined resources (D)</p> Signup and view all the answers

Flashcards

Partnership Definition

A contract where two or more individuals agree to contribute money, property, or industry to a common fund with the intention of sharing profits.

Ease of Formation

Partnerships are easier to establish than corporations, requiring fewer formalities and legal procedures.

Separate Juridical Personality

The partnership exists as a separate legal entity, distinct from its individual partners.

Mutual Contribution

Each partner contributes something of value, such as money, property, skills, or knowledge, to the partnership.

Signup and view all the flashcards

Division of Profit or Loss

Profits and losses are divided among partners according to the agreement they made in the partnership contract.

Signup and view all the flashcards

Mutual Agency

Each partner acts as an agent of the partnership, with the ability to bind other partners to contracts within the scope of the business.

Signup and view all the flashcards

Limited Life

Partnerships have a limited lifespan, potentially ending when partners join, leave, die, or become insolvent.

Signup and view all the flashcards

Unlimited Liability

All partners, except limited partners, are personally liable for the debts of the partnership, even using their personal assets.

Signup and view all the flashcards

Partnership

A business structure where two or more individuals agree to share profits, losses, and responsibilities.

Signup and view all the flashcards

Corporation

A business structure recognized by law with a separate legal existence from its owners.

Signup and view all the flashcards

Creation of a Partnership

The process of forming a partnership begins with an agreement between the partners, outlining their roles, responsibilities, and contributions.

Signup and view all the flashcards

Creation of a Corporation

Creation of a corporation involves legal procedures, typically requiring registration and approval from a government agency.

Signup and view all the flashcards

Number of Partners in a Partnership

A partnership can have a minimum of two partners, but there is no maximum limit.

Signup and view all the flashcards

Number of Shareholders in a Corporation

A corporation must have a minimum of 5 shareholders, but the maximum number is limited to 15.

Signup and view all the flashcards

Commencement of Partnership

A partnership's legal existence begins when the partners execute the Articles of Partnership.

Signup and view all the flashcards

Commencement of Corporation

A corporation's legal existence starts when the Securities and Exchange Commission (SEC) issues a Certificate of Incorporation.

Signup and view all the flashcards

Universal Partnership of All Present Property

A partnership where partners agree to contribute ALL their present assets and future earnings to the partnership. All profits and losses are shared equally.

Signup and view all the flashcards

Universal Partnership of Profits

A partnership where partners agree to share ALL future profits, regardless of their individual contributions.

Signup and view all the flashcards

Particular Partnership

A partnership focused on a specific object, undertaking, or profession. Partners contribute only what is needed for the agreed-upon activity.

Signup and view all the flashcards

General Partnership

All partners contribute and are fully liable for the partnership's debts, even with their personal assets.

Signup and view all the flashcards

Limited Partnership

A partnership where some partners (limited partners) have limited liability, only liable up to their contribution.

Signup and view all the flashcards

Term of Existence

The legal duration of a partnership, which can be extended via agreement.

Signup and view all the flashcards

Classifications of Partnership

Classifying partnerships based on the assets, earnings, and liabilities shared by partners.

Signup and view all the flashcards

The Partners

The partners are responsible for managing and operating the partnership business.

Signup and view all the flashcards

Secret Partner

A partner who participates actively in the business but is not known to the public as a partner.

Signup and view all the flashcards

Silent Partner

A partner who does not take an active part in the business and is not known as a partner.

Signup and view all the flashcards

Nominal Partner (Partner by Estoppel)

A partner who is not actually a partner but presents themselves as one.

Signup and view all the flashcards

Articles of Partnership

A written agreement that outlines the essential details of a partnership.

Signup and view all the flashcards

SEC Registration for Partnerships

A partnership with capital of P3,000 or more must be registered with the Securities and Exchange Commission.

Signup and view all the flashcards

Partnership with a fixed term or for a particular undertaking

A partnership agreement with a predetermined duration or a specific purpose, such as completing a project.

Signup and view all the flashcards

Partnership at will

A partnership where no specific duration is agreed upon, and it continues until the partners decide to dissolve it.

Signup and view all the flashcards

Commercial/ Trading Partnership

A partnership formed for the purpose of engaging in business transactions.

Signup and view all the flashcards

Professional/ Non-trading Partnership

A partnership formed for the purpose of providing professional services, such as legal or medical advice.

Signup and view all the flashcards

De jure Partnership

A partnership that fully complies with all legal requirements for its establishment, making it legally valid.

Signup and view all the flashcards

De facto Partnership

A partnership that fails to meet all legal requirements for its formation but still functions as a partnership in practice.

Signup and view all the flashcards

General Partner

A partner who is personally liable for the partnership's debts, even after its assets are exhausted.

Signup and view all the flashcards

Limited Partner

A partner whose liability is limited to their capital contribution to the partnership.

Signup and view all the flashcards

Managing Partner

A partner who manages the partnership's operations and affairs, as appointed by the other partners.

Signup and view all the flashcards

Liquidating Partner

A partner appointed to handle the winding up and settlement of the partnership's affairs after dissolution.

Signup and view all the flashcards

Dormant Partner

A partner who is involved in the partnership's operations but does not participate in its management or external representation.

Signup and view all the flashcards

Study Notes

BAM 201 IBT: Partnerships and Corporations (Part 1)

  • Partnership Definition: Two or more individuals agree to contribute money, property, or industry to a shared fund, aiming to divide profits. (Civil Code of the Philippines, Article 1767)

Objectives

  • Define partnership and its characteristics/classifications
  • Differentiate partnerships from corporations
  • Understand and discuss accounting procedures in partnership formations

Phases of Partnership

  • Formation: Establishing the partnership
  • Operation: Running the partnership's activities
  • Dissolution: Terminating the partnership
  • Liquidation: Settling the partnership's affairs

Characteristics of Partnerships

  • Ease of Formation: Requires less formality than corporations, often a simple agreement.
  • Separate Juridical Personality: The partnership is a separate entity from its owners (partners).
  • Mutual Contribution: Partners contribute money, assets, or skills to the shared fund.
  • Division of Profit/Loss: Distributing profits and losses among partners as agreed.
  • Mutual Agency: Each partner acts as an agent of the partnership in conducting business.
  • Limited Life: The partnership might dissolve due to new partnerships, deaths, insolvencies, or other factors.
  • Unlimited Liability: Partners are personally responsible for partnership debts, beyond their investment.
  • Income Taxes: Partnerships are taxed at a 30% rate of taxable income (often excluding professional partnerships).
  • Partner's Equity Accounts: Each partner has a capital account and withdrawal account.

Advantages and Disadvantages of Partnerships (vs Sole Proprietorship/Corporation)

  • Advantages (vs Sole Proprietorship):*
  • Enhanced financial resources
  • Combination of partner skills/expertise
  • More flexibility in decision-making.
  • Advantages (vs corporation):*
  • Easier and less expensive to establish
  • More adaptable and flexible operations
  • Disadvantages:*
  • Partnerships are dissolved easily, less stable than corporations.
  • Mutual agency and unlimited liability can create personal financial obligations.
  • Less effective than corporations at raising large amounts of capital.

Partnerships vs Corporations (Differences)

  • Manner of Creation: Partnerships are formed by agreement; corporations by law.
  • Number of Persons: Partnerships can have two or more; corporations require at least 5 but not more than 15.
  • Commencement of Juridical Personality: Partnership's existence begins when formed; corporation when incorporated.
  • Management: Partnerships often have a managing partner, or members working together to run the business; corporations have a board of directors.
  • Extent of Liability: Partners are often personally liable for debts; corporation shareholders are typically only liable to the extent of their investment.
  • Right of Succession: Usually, partnerships do not directly transfer ownership.
  • Term of Existence: Partnerships have an agreed-upon timeframe; corporations have no fixed or stipulated term.

Classifications of Partnerships

  • By Object/Subject Matter: Universal (all present/future assets) or Particular (specific undertaking).
  • By Liability: General (all partners liable) or Limited (some partners have limited liability).
  • By Duration: Fixed term or ongoing (at will).
  • By Purpose: Commercial/Trading or Professional/Non-trading.
  • By Legality: De Jure (legally formed) or De Facto (not legally formed according to the applicable law).

Kinds of Partners

  • General Partner: Liable for all debts, beyond investment
  • Limited Partner: Liable only to the extent of their contribution
  • Capitalist Partner: Contributes money/property
  • Industrial Partner: Contributes expertise/skills
  • Managing Partner: Oversees partnership operations
  • Liquidating Partner: Handles partnership closing
  • Dormant Partner: Passive in partnership
  • Silent Partner: Does not participate but known
  • Secret Partner: Active but unknown to external parties
  • Nominal Partner: Appears to be a partner but isn't

Article of Partnership

  • Agreement in writing
  • Essential provisions (name, purpose, location, formation date, duration, responsibilities, distribution plans)

SEC Registration

  • Partnerships with capital over P3,000 (Philippine Peso) must register with the Securities and Exchange Commission (SEC).

Accreditation to Practice Public Accountancy

  • Certified Public Accountants (CPAs) and associated firms must register with the Professional Regulation Commission and Professional Regulatory Board.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

BAM 201 IBT Partnership and Corporation (Part 1) PDF

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser