1. What is the legal definition of partnership?

(Include the specific section and from

what law)

The Philippine Civil Code provides for a definition of a partnership as follows:

Art. 1767. By the contract of partnership two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profits among
themselves. Two or more persons may also form a partnership for the exercise of a profession.

2. How much is the minimum capitalization of a partnership before they are required
to execute a public instrument to be recorded in the office of the Securities and
Exchange Commission? 

ARTICLE 1772. Every contract of partnership having a capital of three thousand pesos or more,
in money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.

3. What is an articles of partnership? What are included in this document?

Articles of partnership is a contract that forms an agreement among business partners to pool
labor and capital and share in profit, loss, and liability. Such a document acts as a rule book for
limited partnerships by outlining all the conditions under which parties enter into a partnership.

Articles of partnership should indicate who has what duties, but it doesn't have to delegate every
task that could conceivably come up. It should assign certain key duties, such as who is
responsible for keeping track of income and expenses and who will manage inventory, and specify
what decisions can be made by whom. In addition, you should consider including clauses
discussing whether partners are allowed to work for other companies outside the partnership or
whether there should be a non-compete agreement if one partner leaves the business.

 The names of the parties in the partnership

 The partnership's principal place of business
 The purpose of the partnership's business
 The terms of the partnership
 When the partnership will begin and, if not infinite, when and how it will end
 Each partner's capital contribution
 Each partner's percentage of interest in the partnership
 How the partnership's profits will be distributed (equally is the default, but there may be
special conditions)
 How the partnership will be managed
 How salaries (if any) will be distributed
 How and under what conditions partnership rights can be transferred or sold

4. What is a by-laws of a partnership? What are included in this document?

Bylaws are the written rules that control the internal affairs of an organization. Bylaws generally
define things like the group's official name, purpose, requirements for membership, officers' titles
and responsibilities, how offices are to be assigned, how meetings should be conducted, and how
often meetings will be held.

Bylaws also govern the way the group must function as well as the roles and responsibilities of its
officers. They are essential in helping an organization map out its purpose and the practical day-
to-day details of how it will go about its business. Bylaws serve as the legal guidelines of the
organization, and the organization could be challenged in court for its actions if it violates them. 
Typical corporation's bylaws will cover and contain the following:
• The corporation's identifying information, which typically includes the corporation’s name,
address, and principal place of business.
• A count of authorized directors and corporate officers.
• Shares and stock classes that the corporation is authorized to issue, including number of shares
and types of stock classes.
• Process for director and shareholder meetings, which includes the frequency and location of
such meetings and the protocol for those meetings.
• Process for corporate record-keeping, which includes a procedure for preparing and inspecting
records.
• Details about what would constitute a conflict of interest for the corporation.
 
• Process in respect of amending articles of incorporation and bylaws.

5. What are the major characteristics of a partnership? Elaborate each identified

characteristic.

 Ease of formation — as compared to corporations, the formation of a partnership requires

less formality.
 Separate legal personality — the partnership has a judicial personality separate and
distinct from the partners. The partnership can transact and acquire properties in its name.
 Mutual agency — the partners are agents of the partnership for the purpose of its
business. As such, a partner may legally bind the partnership to a contract or agreement
that is in line with the partnership's operations.
 Co-ownership of property — each partner is a co-owner of the properties invested in
the partnership and each has an equal right with his partners to possess specific
partnership property for partnership purposes. However, a partner has no right to possess
a partnership property for any other purpose without the consent of his partners.
 Co-ownership of profits - a partnership is created as a business (a profit-oriented
entity), as such, each partner is entitled to his share in the partnership profit. A stipulation
which excludes one or more partners from any share in the profits or losses is void. (Art.
1799 of the Civil code of the Philippines)
 Limited life the creation of a partnership is basically consensual. As such, a partnership
may be dissolved:
i. by the express will of any partner;
ii. by the termination of a definite term stipulated in the contract; iii. by any event that
makes it unlawful to carry out the partnership; iv. when a specific thing which a
partner had promised to contribute to the partnership perishes before the delivery
 Transfer of ownership — in case of dissolution, the transfer of ownership, whether to a
new or existing partner, requires the approval of the remaining partners.
 Unlimited liability — each partner, including industrial ones, may be held personally
liable for partnership debt after all partnership assets have been exhausted. If a partner
is personally insolvent, his share in the partnership debt shall be assumed by the other
solvent partners.
- A partnership in which all partners are individually liable
- A partnership in which at least one partner is personally liable is called a limited
partnership. A limited partnership includes at least one general partner who
maintains unlimited liability. The others, called limited partners, may limit their
liability up to the extent of their contributions to the partnership. A limited liability
partnership usually has "LLP" in its name.
 6. Identify and elaborate the kinds of partnerships and kinds of partners.

KIND OF PARTNERSHIP

1. General partnership

A general partnership is the most basic form of partnership. It does not require forming a business
entity with the state. In most cases, partners form their business by signing a partnership
agreement. Ownership and profits are usually split evenly among the partners, although they may
establish different terms in the partnership agreement. In a general partnership, all partners have
independent power to bind the business to contracts and loans. Each partner also has total
liability, meaning they are personally responsible for all of the business's debts and legal
obligations.

2. Limited partnership

Limited partnerships (LPs) are formal business entities authorized by the state. They have at least
one general partner who is fully responsible for the business and one or more limited partners who
provide money but do not actively manage the business. Limited partners invest in the business
for financial returns and are not responsible for its debts and liabilities. This silent partner limited
liability means limited partners can share in the profits, but they cannot lose more than they've
invested. In some states, limited partners may not qualify for pass-through taxation. If they begin
actively managing the business, they may lose their status as a limited partner, along with its
protections.

3. Limited liability partnership

A limited liability partnership (LLP) operates like a general partnership, with all partners actively
managing the business, but it limits their liability for one another's actions. The partners still bear
full responsibility for the debts and legal liabilities of the business, but they're not responsible for
errors and omissions of their fellow partners. LLPs are not permitted in all states and are often
limited to certain professions such as doctors, lawyers, and accountants.

4. Limited liability limited partnership

A limited liability limited partnership (LLLP) is a newer type of partnership available in some states.
It operates like an LP, with at least one general partner who manages the business, but the LLLP
limits the general partner's liability so all partners have liability protection.

KIND OF PARTNERS

1. General Partner: a partner that holds management responsibility. They are responsible for
the operations of the business. Furthermore, general partners face unlimited liability – they
are fully liable for the debts of the business. This means that their personal assets can be
seized to settle debt obligations or lawsuits.
2. Limited Partner: a partner with a financial stake in the business but no management
responsibilities. Therefore, limited partners cannot be held personally liable for the debts of
the business, as they do not actively manage it. The most a limited partner can lose is their
investment in the business. Essentially, limited partners are most like shareholders of a
corporation.

7. Enumerate the advantages and disadvantages of a partnership.

Advantage Disadvantage
 Ease of formation  Easily dissolved/ limited life.
  Shared responsibility of running the  Unlimited liability.
business.  Conflict among partners.
 Flexibility in decision making.  Lesser capital compared to a
 Greater capital compared to sole corporation.
proprietorship.  A partnership (other than a general
 Relative lack of regulation by the professional partnership) is taxed like a
government as compared to corporation.
corporations.

8. Compare and contrast sole proprietorships, partnerships, and corporations.

Sole Proprietorship Partnership Corporations

Is a business that is owned by
only one individual. It is the
most common and simplest
form of a business
organization. The business
owner is called a “sole
proprietor.” A sole
proprietorship is registered
with the Department of Trade
and Industry.
Is a business that is owned by
two or more individuals who
entered into a contract to carry
on the business and divide
among themselves the
earnings therefrom. The
business owners are called
partners. The partnership is
registered with the Securities
and Exchange Commission.
A corporation is also owned by
more than one individual.
However, unlike a partnership
a corporation is created by
operation of law rather than
contract. Ownership in a
corporation is represented by
shares of stocks. The owners
are called stockholders or
shareholders. A corporation is
registered with the Securities
and Exchange Commission.