Partnership Formation Theories PDF

Partnership Accounting PARTNERSHIP Definition of Partnership Characteristics of Partnership ACCOUNTING Advantage and DIsadvantage Types of Partners DISCUSSION OUTLINE Types of Partnerships Partnership Formation DEF...

Partnership Accounting PARTNERSHIP Definition of Partnership Characteristics of Partnership ACCOUNTING Advantage and DIsadvantage Types of Partners DISCUSSION OUTLINE Types of Partnerships Partnership Formation DEFINITION OF PARTNERSHIP PARTNERSHIP is a contract whereby two or more persons bind themselves to contribute money, property, or industry into a common fund with the intention of dividing profits among themselves. (Article 1767 of the Civil Code of the Philippines) Youth on the Rock | Partnership Accounting  CHARACTERISTICS OF PARTNERSHIP Mutual Division of Co-ownership Limited Life Agency Profit and of Contributed Losses Assets Income Tax Partner’s Mutual Unlimited Equity Contribution Liability Account  Brings greater financial capability to the business. Combines special skills, expertise ADVANTAGES VS and experience of the partners PROPRIETORSHIP Offers relative freedom and flexibility of action in decision- making. Youth on the Rock | Partnership Accounting  Easier and less expensive t o organize. ADVANTAGES VS CORPORATION More personal and informal. Youth on the Rock | Partnership Accounting  Easily dissolved and thus unstable compared to a corporation. DISADVANTAGES Mutual agency and unlimited liability may create personal obligations to partners. Less effective than a corporation in raising large amounts of capital. Youth on the Rock | Partnership Accounting PARTNERSHIP VS. CORPORATION Partnership Corporation Manner of Creation Mere agreement Operations of Law Number of Person Two or more Not exceeding 15; can have one-person corporation Commencement of Execution of Articles of issuance of certificate of Juridical Personality Partnership incorporation by the Securities and Exchange Commission Management every partner is an agent of management is vested the partnership if the on the Board of Directors partners did not appoint a managing partner PARTNERSHIP VS. CORPORATION Partnership Corporation Extent of Liability each of the partners except in a corporation, a limited partner is. stockholders are liable only liable to the extent of his to the extent of their personal assets interest or investment in the corporation Right of Succession no right of succession right of succession Terms of Existence any period of time perpetual existence unless stipulated by the partners its articles of incorporation provides otherwise TRADING PARTNERSHIP One whose main activity is the manufacture or the purchase and sale KINDS OF of goods. PARTNERSHIP NON-TRADING As to Activity One organized for the purpose of rendering services. Youth on the Rock | Partnership Accounting UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY All assets contributed to the partnership at the time of constitution and KINDS OF subsequent acquisitions become common partnership assets. PARTNERSHIP UNIVERSAL PARTNERSHIP As to Object OF ALL PROFIT Partnership assets consists of assets acquired during the life of the partnership and only the usufruct of assets contributed at the time of partnership formation. Youth on the Rock | Partnership Accounting PARTICULAR PARTNERSHIP KINDS OF One which has for its object PARTNERSHIP determinate things, their use of fruits, or a specific undertaking or the exercise of a profession or As to Object vocation. Youth on the Rock | Partnership Accounting GENERAL CO- PARTNERSHIP One consisting of general partners who are liable prorate and sometimes KINDS OF solidarily with their separate property for partnership debts. PARTNERSHIP LIMITED PARTNERSHIP As to Liability One formed by two or more persons having as members one or more general partners and one or more limited partners. Youth on the Rock | Partnership Accounting PARTNERSHIP AT WILL No time is specified, or no specific undertaking. May be terminated KINDS OF anytime. PARTNERSHIP PARTNERSHIP WITH A As to Duration FIXED- TERM Term is agreed upon, or formed for a particular undertaking. Youth on the Rock | Partnership Accounting ORDINARY PARTNERSHIP One which actually exists among the partners and also as to third persons. KINDS OF PARTNERSHIP PARTNERSHIP BY ESTOPPEL As to Representation to One which in reality is not a partnership Others but is considered a partnership only in relation to those who by their conduct or omission are precluded to deny or disprove the partnership’s existence. Youth on the Rock | Partnership Accounting DE JURE PARTNERSHIP One which complied with all the requirements for its establishment. KINDS OF PARTNERSHIP DE FACTO PARTNERSHIP As to Legality of Existence One which failed to comply with one or more of the requirements for its establishment. Youth on the Rock | Partnership Accounting SECRET PARTNERSHIP One wherein the existence of certain persons as partners is not made known KINDS OF to the public by any of the partners. PARTNERSHIP OPEN PARTNERSHIP As to Publicity One wherein the existence of certain persons as partners is made known to the public by the members of the firm. Youth on the Rock | Partnership Accounting CAPITALIST PARTNER One who contributes capital in the form of money or property. CLASSES OF INDUSTRIAL PARTNER PARTNERS One who contributes industry, labor, talent, skills or service. As to Contribution CAPITALIST INDUSTRIAL PARTNER One who contributes money or property or industry. Youth on the Rock | Partnership Accounting GENERAL PARTNER One whose liability to third persons extends to his separate (private) CLASSES OF property. PARTNERS LIMITED PARTNER As to Liability One whose liability to third persons is limited only to the extent of his capital contribution to the partnership. Youth on the Rock | Partnership Accounting MANAGING PARTNER One who manages actively the business of the partnership. CLASSES OF PARTNERS SILENT PARTNER As to Management One who does not participate in the management of partnership affairs. Youth on the Rock | Partnership Accounting LIQUIDATING PARTNER One who takes charge of the winding up of partnership affairs upon dissolution. NOMINAL PARTNER One who is not really a partner, not a Other party to the partnership agreement, but classifications is made liable as a partner for the protection of innocent third persons. OSTENSIBLE PARTNER One who takes active part in the management of the firm and is made known to the public as partner to the business. Youth on the Rock | Partnership Accounting SECRET PARTNER One who takes active part in the management of the business but whose connection with the partnership is not Other made known to the public. classifications DORMANT PARTNER One who does not take active part in the management of the business and is not known to the public as partner to the business; he is both a silent and a secret partner. Youth on the Rock | Partnership Accounting KNOWLEDGE QUIZ  CL AS S E S OF P ART NE RS One who contributes capital in the form of money or property. CAPITALIST PARTNER Youth on the Rock | Partnership Accounting  KI NDS OF P ART NE RS HI P One whose main activity is the manufacture or the purchase and sale of goods. TRADING PARTNERSHIP Youth on the Rock | Partnership Accounting  KI NDS OF P ART NE RS HI P One which complied with all the requirements for its establishment. DE JURE PARTNERSHIP Youth on the Rock | Partnership Accounting  CL AS S E S OF P ART NE RS One who does not take active part in the management of the business and is not known to the public as partner to the business; he is both a silent and a secret partner. DORMANT PARTNER Youth on the Rock | Partnership Accounting  KI NDS OF P ART NE RS HI P One formed by two or more persons having as members one or more general partners and one or more limited partners. LIMITED PARTNERSHIP Youth on the Rock | Partnership Accounting  KI NDS OF P ART NE RS HI P Partnership assets consists of assets acquired during the life of the partnership and only the usufruct of assets contributed at the time of partnership formation. UNIVERSAL PARTNERSHIP OF ALL PROFIT Youth on the Rock | Partnership Accounting  CH ARACT E RI S T I CS OF P ART NE RS H I P The personal assets of any of the partner may be used to satisfy the creditor’s equities in the partnership if the firm’s assets are not enough to settle the liabilities to the outsiders. UNLIMITED LIABILITY Youth on the Rock | Partnership Accounting  CH ARACT E RI S T I CS OF P ART NE RS H I P Partnerships, except those organized for the exercise of profession, are subject to income tax rate of 30% of profit. INCOME TAX Youth on the Rock | Partnership Accounting  CH ARACT E RI S T I CS OF P ART NE RS H I P Any partner may act as an agent of the partnership in conducting its affairs. MUTUAL AGENCY Youth on the Rock | Partnership Accounting  CH ARACT E RI S T I CS OF P ART NE RS H I P Partnership is a contract whereby two or more persons bind themselves to contribute _____, ________, or ________ into a common fund with the intention of dividing profits among themselves. MONEY, PROPERTY, INDUSTRY Youth on the Rock | Partnership Accounting