Corporation.
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Created by operation of law
Required at least 5 incorporations to be organized
Begins to have incorporate existence and juridical personality from the date of issuance of the
certificates of the incorporations by the Securities and Exchange Commission
Can exercise only the powers granted by law or incidents to its existence
Capital raising ability is limited by the profitableness in which funds of stockholder are
employed.
Creditors of corporation cannot claim the personal assets of stockholders
Shares of stock can be transferred without the consent of the other stockholders.
There is continuity of life. The life of corporation depends on the time stated in its charter. At
the expiration of such time, the charter may be renewed, extending the life of the corporation
There is no mutual agency. A corporation stockholder has no power to bind the corporation to
contract. His right is limited to vote in the stockholder’s meeting.
May not be established for a term in excess of 50 years.
Can only be dissolved with the consent of the state.
Partnership
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Created by mere agreement of the parties
May be organized by only two persons
Commences to acquire juridical personality from the moment of the execution of partnership
contract.
May exercised any power authorized by the partners provided it is not contrary to law, morals,
good customs, public order or public policy.
Capital raising ability is limited by the number of partners.
General partners have unlimited liability
The consent of other partners is sought if an interest is shared with others
Since there are several causes of dissolving a partnership such as death of a partner, insolvency
of a partner, etc. Very likely it has a shorter life.
There is mutual agency. The partners can bind the partnership to any contract within the scope
of its business.
Maybe formed for any period of time stipulated by the partners.
May be dissolved any time by the will of any or all of the partners
5. What are the obligations of each partner.
Obligations of partners
1. Contribution of capital
To contribute equally to the capital of the partnership unless there is a stipulation to the contrary.
2. Obligations with respect to 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 its delivery to the partnership with the diligence of a good
father of a family as a rule.
c. To be liable for damages 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.
e. To be liable for the fruits of the thing from the time they should have been delivered without
the need of any demand.
3. Obligations with respect to contribution of money
a. To deliver to the partnership at the time it was constituted or on the date stipulated the
money he has promised to contribute.
b. To pay interest on the amount he had promised to contribute from the time he should have
complied with his obligation.
c. To pay damages suffered by the partnership by reason of the default.
4. Obligations with respect to amount appropriated
a. To reimburse to the partnership the amount that he has taken from the partnership coffers.
b. To pay interest on the amount he had converted for his own use from the time of conversion.
c. To pay the damages suffered by the partnership by reason of the conversion. (Art. 1788) C.
5. Obligation to contribute additional capital
a. To contribute additional share to the capital in case of an imminent loss of the business of the
partnership, except:
1) If he is an industrial partner, or
2) If there is an agreement to the contrary.
b. To sell his interest to the other partners if he refuses to contribute such additional capital.
6.Obligation of a partner who has received his share of the partnership credit
- To bring to the partnership capital his share of a partnership credit which he has received in
whole or in part even if he may have given his receipt only if the following requisites are present:
a. The other partners have not collected their shares, and
b. The debtor becomes insolvent after the partner has received the payment. (Art. 1793)
7. Obligation to pay damages to the partnership
To pay to the partnership for damages suffered by it through his fault. He cannot compensate
them with the profits and benefits which he may have earned for the partnership by his industry.
However, the courts may equitably lessen this responsibility if through the partner's extraordinary
efforts in other activities of the partnership, unusual profits have been realized.
8. Obligation to bear risk for property contributed
- To bear the risk of specific and determinate things owned by him which are not fungible,
contributed to the partnership so that only their use and fruits may be for the common benefit.
The partnership shall bear the risk for the. following contributions of partners:
a. Fungible things or those that cannot be kept without deteriorating.
b. Things contributed to be sold.
c. Things brought and appraised in the inventory unless there is a stipulatio
9.Obligation to render information
To render on demand true and full information of all things affecting the partnership to.
a. Any partner, or
b. Legal representative of any deceased partner, or
c. Legal representative of any partner under legal disability.
10. Obligation to account
- To account to the partnership for any benefit, and hold as trustee for it any profits, derived by
him without the consent of the partners from any transaction connected with the formation, conduct,
or liquidation of the partnership or from use by him of its property. (Art. 1807)
11. Liability of a newly-admitted partner for obligations of the partnership
a. Obligations existing at the time of his admission
b. Obligations incurred after his admission.
7. Discuss the sharing of profits and losses.
Rules on division of profit and loss
1. 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.
2. If aside from the capitalist partners, there is also an industrial partner (or there are industrial
partners)
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.
b. Losses
1) The industrial partner shall not share in the losses.
2.) The capitalist partners shall share in the losses as follows:
a) According to their agreement.
b) In the absence of any agreement thereon, each capitalist partner shall share
in the losses in the same proportion as the share of each in the profits.
c.In the absence of both, each capitalist partner shall share in the losses in proportion to his
capital contribution.
3. If aside from capitalist partners, there is also a capitalist- industrial partner (or there are capitalistindustrial partners)
a. Profits
1) The profits shall be divided according to their agreement.
2) In the absence of any agreement thereon, profits shall be divided as follows:
a) The capitalist-industrial partner shall first receive a just equitable share of the
profits in capacity as industrial partner;
b) Thereafter, each capitalist partner, including the capitalist-industrial partner
in his capacity as capitalist partner, shall share in the profits in proportion to contribution.
b. Losses
1) Losses shall be divided among the partners, including the capitalist-industrial partner in his
capacity as capitalist partner, according to their agreement.
2)In the absence of any agreement thereon, losses shall be divided among the partners
including the capitalist-partner in his capacity as capitalist partner, according to the ratio of their capital
contribution.
3)In both of the above cases, the capitalist- industrial partner shall not share in the losses in his
capacity as industrial partner.
Any stipulation which excludes one or more partners from any share in the profits and losses is
void except one which exempts an industrial partner from losses because the law. provides that he shall
not be liable therefor.
Designation of share in the profits and losses by a third person or by a partner
1. If entrusted by the partners to a third person
The same shall be binding upon the partners and may be impugned only when it is manifestly
inequitable. However, even if such designation by a third person is manifestly inequitable, it can no
longer be impugned:
a. By a partner who has begun to execute it; or
b. By any partner if three months had already lapsed from the time he obtained knowledge
thereof.
2. If entrusted to one of the partners
- The designation is void because it cannot be entrusted to one of the partners. (Art. 1798)
Accordingly, the profits and losses shall be divided among the partners if there was no stipulation
thereon.
8. Winding up is the process of settling the business or affairs of partnership after dissolution.
Termination refers to the point when all of the business or affairs of the partnership are completely
wound up.
Dissolution may be caused by:
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b.
c.
d.
e.
f.
g.
h.
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Termination of the term or particular undertaking specified in the agreement
By the express will.
When any event makes the business of the partnership unlawful
In some cases of loss
By death of any partner
By insolvency of any partner or of the partnership
By the civil interdiction of any partner
By decree of court in the following cases:
A partner has been declared insane in any juridical proceedings
A partner becomes incapable of performing his part of the contract
A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the
business
A partner will fully or persistently commits a breach of the partnership agreement
The business of the partnership can only be carried on at a loss.
Other circumstances render a dissolution equitable.