Characteristics of a Partnership
By: keshcru • February 16, 2018 • Study Guide • 3,127 Words (13 Pages) • 1,192 Views
PARTNERSHIP
- 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
Characteristics of a partnership
- Consensual
- Principal
- Bilateral or multilateral
- Nominate
- Preparatory
- Onerous
Essential requisites of partnership
- There must be a valid contract
- Its formation cannot be imposed upon a person because a partnership is a fiduciary relationship
- There must be a mutual contribution of money, property, or industry to a common fund
- A limited partner may contribute cash or other property, but not services
- It must has a lawful object or purpose
- If a partnership has an unlawful object, it is void
- 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
Forms of a partnership contract
Contribution | Requirements | Effect if the above requirements are not complied with |
immovable property or real rights | -partnership contract must be in a public instrument -inventory of the said property must be made | -partnership contract is void -partnership will not have any juridical personality |
P3000 or more in money or property | - partnership contract must be in a public instrument -registered with SEC | -partnership contract is still valid |
limited partnership | -certificate signed under oath by the partners & recorded with the SEC | -partnership will be considered a general partnership |
Kinds of partnership
- As to object
- Universal partnership
- Universal partnership of all present property
- Property belonging to the partners at the time of the partnership
- Profits that may be acquired from the present property
- Property acquired by each partner after the formation of the partnership but only if stipulated (except property acquired by inheritance, legacy, or donation)
- Universal partnership of profits
- Profits obtained by the partners by their work or industry during the existence of the partnership (excludes those acquired by chance or lucrative title)
- Usufruct belonging to each partner at time of constitution of partnership
- Profits and fruits from the properties in #s 1 and 2
- Profits and fruits from properties acquired after constitution if stipulated
- Particular partnership: contribution of determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession
- As to liability
- General partnership
- Limited partnership
- As to duration
- Partnership for a fixed term
- Partnership for a particular undertaking
- Partnership at will
- As to representation to others
- Ordinary partnership
- Partnership by estoppel
- When a person represents himself as a partner in an existing partnership
all partners consented | - partnership liability results - assets of the partnership shall be used to pay the liability - if partnership assets are not enough, actual partners and the one who made the misrepresentation shall be liable with their separate properties |
not all partners consented | - no partnership liability results - actual partners + the one who made the misrepresentation shall be liable jointly or pro-rata |
- When a person represents himself as a partner in a non-existing partnership
Rules on division of profit and loss
Profits | Losses | |
All are capitalist partners | 1. according to agreement 2. proportion to his capital contribution | 1. according to agreement 2. same as profit agreement 3. proportion to his capital contribution |
there is an industrial partner | 1. according to agreement 2. industrial partner shall first receive a just & equitable share thereafter, capitalist partners will share in proportion to their capital contribution | 1. industrial partner shall not share in the losses 2. capitalist partners -according to their agreement -same as profit agreement -proportion to his capital contribution |
there is a capitalist-industrial partner | 1. according to agreement 2. capitalist-industrial partner shall first receive a just & equitable share thereafter, capitalist partners | 1. according to agreement 2. according to their ratio of their capital contribution *capitalist-industrial partner shall not share in the losses as his capacity as industrial partner, only as a capitalist 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.
Designation of share in the profits and losses
- Entrusted by the partners to a third person
- Binding upon the partners and may be impugned (disputed) only when it is manifestly inequitable
- Despite being manifestly inequitable, it can no longer be impugned:
- By a partner who has begun to execute it
- By any partner if 3 months had already lapsed from the time he obtained knowledge thereof
- Entrusted to one of the partners
- Void
Rules of management
Scope of authority | Revocation of appointment of managing partner | |
Partner has been appointed manager in the Articles of Partnership | managing partner may execute all acts of administration despite the opposition of his partners unless he acts in bad faith | -with just or lawful cause: can be revoked by the vote of partners owning the controlling interest -without just or lawful cause: can be revoked only with the consent of all the partners including the managing partner |
Partner has been appointed manager after the partnership has been constituted | managing partner 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 | -may be removed with or without just or lawful cause by the vote of the partners owning the controlling interest |
2 or more partners have been appointed as managers | case 1. each managing partner shall perform only the duties specified in his appointment case 2. each one may separately execute all acts of administration case 3. Stipulation that none of the managing partners shall act without the consent of the others | Rule in case of opposition by other partners |
case 2. Decision of the majority of the managing partner shall prevail. In case of a tie, the decision of the managing partner/s owning the controlling interest shall prevail. case 3. concurrence of all of them shall be necessary for the validity of the acts | ||
Manner of management has not been agreed upon | -all the partners shall be considered agents of the partnership -whatever any one of them may do alone shall bind the partnership | Decision of the majority shall prevail. In case of a tie, the decision of the managing partner/s owning the controlling interest shall prevail. |
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