JAMES NICOLE L. MATUDIO BSAC 4-2 ASSIGNMENT LESSON 1 1. Distinguish Partnership from corporation, Cooperatives and other Business Organizations. - Partnership, according to its meaning, is a contract of two or more persons who bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. PARTNERSHIP vs Corporation, Cooperatives, and other Business Organizations Corporation is owned by shareholders and can be formed for profit and for nonprofit. Cooperatives, on the other hand, is formed with a sole purpose or common goal. Sole Proprietor is formed only with one owner. Partnership is formed with the intention of dividing profits among partners. Partnership is an example of a Consensual Contract—meaning it is just perfected by mere consent. It does not need to comply with certain formalities to be conferred of the separate juridical personality. Unlike in corporations, where they are created by operation of law and not by mere consent. The corporation must adhere and comply with the formalities required by Law in order to be validly formed and be conferred with the separate juridical personality. For the life of the business, a partnership has specified situation where it may be dissolved—death of a partner, bankruptcy, or even in the agreement of the partners. A corporation continues its operation until dissolved by Law. Partnership is different from Co-ownership or Co-possession in that the properties remain under the ownership and name of the Co-owners or Co-possessors and thus there is no Mutual Contribution over the properties which is an essential requisite in a Contract of Partnership [Second paragraph of Article 1769]. Stock, or ownership, of a corporation can be sold or transferred easily. With a partnership, a change in ownership means that a new partnership must be created. In the corporation, a board of directors makes the policies. In a partnership, the members usually have to agree unanimously about new policies. 2. Describe the elements and kinds of partnership. - Elements of the Partnership 1. 2. 3. 4. 1. There must be a Valid Contract. In order for a partnership to exist, there must be a voluntary agreement among the parties to carry on the business as partners. It operates under the doctrine of Delectus personae—where a person is free to choose those whom he wants to be associated with in partnership. 2. There must be a mutual contribution of money, property, or industry to a common fund (Art. 1767). The property may be contributed in the form of real or personal, tangible or intangible properties. 3. It must have a lawful object or purpose (Art. 1770). If a partnership has an unlawful object, it is void. If such illegality constitutes a crime, the partners will be criminally prosecuted and the profits and effects and instruments of the crime will be confiscated in favor of the government as provided in Revised Penal Code. 4. The partnership must be established for the common benefit or interest of the partners which is to obtain profits and to divide the profits among the partners (Art. 1768 & 1770). This is an element that distinguishes it from religious, civic and social organizations. - Kinds of Partnership As to object a. Universal Partnership – It may either be a universal partnership of all present property or a universal partnership of profits (Art. 1777). b. Particular Partnership – it has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession (Art. 1783). As to Liability a. General Partnership – a partnership where all the partners are general partners who are liable to the extent of their separate property after the partnership assets have been exhausted. b. Limited Partnership – a partnership where there is at least one general partner and at least one limited partner. As to Duration a. Partnership for a fixed term – one for which a period for its duration is fixed by the partners, such as a partnership with a term of 5 years. b. Partnership for a particular undertaking – one which is organized for a certain undertaking which, when attained, will cause the termination of the partnership. c. Partnership at will – one where no period is fixed by the parties for its duration; hence, may be terminated at will by the partners. As to representation to others a. Ordinary partnership – one which actually exists among the partners as well as to third persons. b. Partnership by estoppel – one which in reality is not a partnership but is considered as one with respect to those who, by reason of their conduct or admission, are precluded from denying its existence. 3. Explain the formalities required in the formation of partnership. - A partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability of a partner. 4. Identify the Obligation of the partners to themselves, to the partnership and to third persons. Obligation of the partners to themselves 1. Contribution of Capital 2. Obligations with respect to the contribution of property a. To deliver to the partnership at the time it was constituted or on the date stipulated the property he has promised to contribute. b. To take care of the property before the delivery to the partnership with the diligence of a good father of a family as a rule. c. To be liable for damage in case of default. d. To answer for eviction in case the partnership is deprived of the specific or determinate thing he has contributed to the partnership. 3. Obligations with respect to contribution of money 4. Obligations with respect to amount appropriated 5. Obligations to contribute additional capital 6. Obligation of a partner who has received his share of the partnership credit 7. Obligation to pay damages 8. Obligation to bear risk for property contributed. 9. Obligation to render information 10. Obligation to account 11. Liability of a newly-admitted partner for obligations of the partnership Obligations of the partnership to the partners and to third persons 1. To pay to the partner any amounts he may have disbursed for the partnership with interest from the time the expenses were made. 2. To pay for the obligations which a partner may have contracted in good faith in the interest of the partnership business. 3. To answer for risks in consequence of its management. 5. Identify the rules of Management - When a partner has been appointed manager in the articles of partnership a. Scope of Authority The managing partner may execute all acts of administration despite the opposition of his partners unless he acts in bad faith (Art. 1800). b. Revocation of Appointment of managing partner 1. With just or lawful cause – his appointment can be revoked by the vote of the partners owning the controlling interest. 2. Without just or lawful cause – his appointment can be revoked only with the consent of all the partners including the managing partner because such revocation would be a novation of the terms thereof. - When a partner has been appointed manager after the partnership has been constituted a. Scope of authority He may execute all acts of administration but in case of opposition by the other partners, the partners owning the controlling interest may resort to voting for his removal as manager. b. Revocation of his appointment as managing partner He may be removed with or without just or lawful cause by the vote of the partners owning the controlling interest. - When two or more partners have been appointed as managers a. When there is a specification of their respective duties o Each managing partner shall perform only the duties specified in his appointment. b. When there is no specification of their respective duties or there is no stipulation that one shall not act without the consent of the others. o Each one may separately execute all acts of administration. c. When there is a stipulation that none of the managing partners shall act without the consent of the others. o The concurrence of all of them shall be necessary for the validity of the acts. The absence or disability of one managing partner cannot be alleged, the other managing partners are not authorized to act for the partnership unless there is imminent danger of grave or irreparable injury to the partnership. - When the manner of management has not been agreed upon a. All the partners shall be considered agents of the partnership b. Whatever any one of them may do alone shall bind the partnership. c. Rule in case of opposition of the other partners. 1. The decision of the majority shall prevail. 2. In case of a tie, the decision of the partners owning the controlling interest shall prevail. 6. Explain the Distribution of Profits and Losses - If all are capitalist partners a. Profits and losses shall be divided according to their agreement. b. If only the sharing of the partners in the profits has been agreed upon, the share of each partner in the losses shall be in the same proportion as the share of each in the profits. c. In the absence of both, the share of each partner in the profits and losses shall be in proportion to his capital contribution. - If aside from the capitalist partners, there is also an industrial partner o Profits 1. The profits shall be divided according to their agreement. 2. In the absence of any agreement thereon, the industrial partner shall first receive a just and equitable share of the profits, and thereafter, each capitalist partner shall share in the profits in proportion to his capital contribution. o Losses 1. The industrial partner shall not share in the losses. 2. The capitalist partners shall share in the net losses according to their agreement, or shall share in the losses in the same proportion as the share in the profits, or shall share in the losses in proportion to his capital contribution. 7. Explain the sharing of Losses and Liabilities - Nature of liability a. Pro rata – The liability of the partnership shall be equally divided among the partners. b. Subsidiary – Each partner shall be liable with his separate property after all the assets of the partnership have been exhausted. - Partners liable All general partners whether: a. Capitalist partner, or b. Industrial partner - Statues of stipulation exempting a partner from pro rata and subsidiary liablity after exhaustion of partnership assets a. Void as to third persons. b. Valid among partners.
