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 an agreement, division of profits is in accordance with capital
contributions
Example:
a. LOVE Enterprises is owned by partner Lorin, Ody, Venice and Ellie with capital
contributions of 10,000, 20,000, 30,000, 40,000 respectively. During the year, the
partnership realized a net profit of 8,000.
I. Assuming the partners agreed to divide profits, 2:1:2:5
II. If there is NO profit-sharing agreement.
b. Assuming the partnership sustained a loss of 7,000.
I. Assuming the partners agreed to divide losses, 3:2:1:4
II. If there is NO loss-sharing agreement.
III. If there is NO profit and loss sharing agreement.
2. if aside from capitalist partners, there is also an industrial partner(s)
a. Profits
I. The profits shall be divided according to their agreement
II. In the absence of an agreement, the industrial partner shall receive first a just
and equitable share of the profits and thereafter, each of capitalist partner shall share in
the profits in proportion to the capital contribution.
Example:
Wily, Anne, Gio and Iya are partners in WAGI Company. Wily, Anne and Iya are
capitalist partners with contributions of 20,000, 30,000 and 50,000 respectively. Iya is
an industrial partner. WAGI earned 15,000 during the period.
I. Assuming the partners agreed to divide profits, 25:25:25:25
II. If there is NO profit-sharing agreement and decided that Iya’s just and
equitable share is 3,000.
b. Losses
I. the industrial partner shall not share in the losses.
II. The capitalist partners shall share in the losses as follows:
 1. According to their agreement
2. In the absence of agreement, the share of each capitalist partner in the
losses shall be in the same proportion as the share of each in the
profits.
3. In the absence of 1 and 2, division of losses is in accordance with
capital contributions
Example:
Carlos, Albert, Roland and Edwin are partners in CARE Company with Carlos
contributing 20,000, Albert 30,000 and Roland 50,000. Edwin contributed his industry.
During the year, CARE suffer a loss of 12,000.
I. Assuming the loss agreement is 1:2:3
II. If there is no loss sharing agreement but has a profit sharing agreement of
3:4:5:2
III. If there is no profit sharing agreement.
3. If aside from capitalist partners, there is also a capitalist industrial partner(s).
a. Profits
I. The profits shall be divided according to their agreement
II. In the absence of any agreement, profits shall be divided as follows:
1. The capitalist-industrial partner shall first receive a just and equitable
share of the profits in his capacity as industrial partner:
2. Thereafter, each capitalist partner, including the capitalist-industrial
partner in his capacity as a capitalist partner, shall share in the profits
in proportion to his capital contribution.
Example:
Mark, Orland, Robert and Edgar are partners of MORE Company. Mark, Orland, Robert
are capitalist partners with contributions of 10,000, 20,000 and 30,000 respectively.
Edgar is a capitalist industrial partner with a capital contribution of 40,000. During the
year, MORE Company realized a profit of 20,000.
I. Assuming there is no profit-sharing agreement. Equitable share of Edgar in
his capacity of an industrial partner is 4,000.
b. Losses
1. Losses shall be divided among the partners, including the capitalist-industrial
partner in is capacity as capitalist partner, according to their agreement.
2. In the absence of any agreement, losses shall be divided among the partners,
including the capitalist-industrial partner in is capacity as capitalist partner, according to
their capital contribution.
 3. In both cases of 1 and 2, the capitalist industrial partner shall not share in the
losses in is capacity as industrial partner.
Example:
Sonia, Uni, Rod and Elsa are partners in SURE Company with capital contributions of
10,000, 20,000, 30,000, and 40,000 respectively. Elsa is also an industrial partner being
the manager of the partnership. The partnership sustained a loss of 14,000.
I. Assuming the agreement is 2:3:5:4
II. If there is no loss sharing agreement.

Rules on Management
1. When a partner has been appointed manager in the articles of partnership.
a. Scope of Authority

b. Revocation of appointment as a managing partner.

2. When a partner has been appointed manager after the partnership has been
constituted.
a. Scope of Authority

b. Revocation of appointment as a managing partner.

3. When two or more partner have been appointed as managers
a. When there is a specification of their respective duties
I. Scope of Authority
b. When there is no specification of their respective duties
I. Scope of Authority
II. Rule in case of opposition of the other managers
Example:
MARILEN Company is owned by the following partners, Mary 10,000, Ana 20,000, Rey,
30,000, Inah 40,000, Liza 50,000, Edna, 100,000 and Nora 200,000. Except for Edna
and Nora, all the rest are managers without any specifications of their duties.
1. Mary wants to buy goods from ERA Company, Liza opposes it. Ana and Rey side
with Mary while Inah sides with Liza.
2. Suppose Rey abstains thereby creating a tie.

c. When there is a stipulation that none of the managing partners shall act
without the consent of the others
I. Vote required
II. Rule in case of absence or disability of one of the managing partners
4. When the manner of management has not been agreed upon
 a. All of the partners are manager
b. Whatever any one of them may do alone shall bind the partnership.
c. Rule in case of opposition of the other partners
I. The decision of the majority shall prevail.
II. In case of tie, the decision of the partners owning the controlling
interest shall prevail.

Example:
MARILEN Company is owned by the following partners, Mary 10,000, Ana 20,000, Rey,
30,000, Inah 40,000, Liza 50,000, Edna, 100,000 and Nora 200,000. The partners did
not designate who among themselves shall be the manager.
1. Mary wants to buy goods from ERA Company, Liza opposes it. Ana, Rey and
Inah side with Mary while Edna and Nora side with Liza.
2. Suppose Rey abstains thereby creating a tie.