Partnership Flashcards by Paul Robert CPA

Partnership is a contract wherein two or more persons agreed
- to contribute MPI
- to divide profits
- to exercise profession (GPP = Particular Partnership)

As a contract, it must have a lawful object / purpose. What will happen if it is unlawful?

Yes

dissolve → profits will be in favor of government

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Characteristics (BCCNOPP)
- same as contract
- Bilateral, Consensual, Commutative
- Nominate, Onerous, Principal
- + Preparatory

Yes

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Partnership is a juridical person → separate juridical personality

What if the partners are insolvent? What will happen to the partnership?

dissolve

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Cases when There is No Partnership
- Between persons who are not partners as to each other (XPN : estoppel)
- Co-ownership or co-possession (!!!)
- Sharing of gross returns

Yes

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Receipt of share of profits of the business → prima facie evidence that he is a partner

EXCEPTIONS
- As a debt by installment or otherwise
- As wages of employee
- As rent to a landlord
- As annuity to a widow or representative of a deceased partner

Yes

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WHO MAY BECOME A PARTNER?
- Natural Person ✓
- Partnership ✓
- Corporation ✓

Yes

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Form - can be oral or written

What is the form required
- if capital is 3K or more? if not complied, what is the effect?
- if immoveable property is contributed? if not complied, what is the effect?

Capital is 3K or More
- partnership contract in public instrument
- registered in SEC
- not complied → still valid

Immoveable Property
- partnership contract in public instrument (PISA)
- inventory signed and attached to public instrument
- not complied → void

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Kinds of Partnership
- General → all must be general partners
- Limited → at least 1 general, at least 1 limited

Yes

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Kinds of Partnership
- Fixed Term → term expired = dissolved
- Particular Undertaking → accomplished = dissolved
- At Will

What if for fixed term and particular undertaking, they still continue even after the term expired or purpose is accomplished?

Constituted a Partnership at Will

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Kinds of Partnership
- Universal Partnership of all Present Property
- Universal Partnership of all Profits

What are automatically included as contributions?

If ambiguous → only a universal partnership of all profits

Universal Partnership of all Present Property
- present property
- profits of present property

Universal Partnership of all Profits
- present property → usufruct only
- profits acquired by work or industry

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Kinds of Partnership
- Universal Partnership of all Present Property
- Universal Partnership of all Profits

What are stipulated to be listed as contributions?

If ambiguous → only a universal partnership of all profits

Universal Partnership of all Present Property
- future property (XPN : inheritance)
- profits of future property (even if from inheritance)
- other profits

Universal Partnership of all Profits
- profits acquired by chance
- profits of future property (even if from inheritance)

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Persons not allowed to donate to each other
- Husband and wife
- Guilty of adultery and concubinage
- Guilty of the same criminal offense
- Public officer by reason of his office

Since they cannot donate to each other, they are not allowed to form a partnership. True or False?

False (they are not allowed to form a UNIVERSAL partnership)

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Kinds of Partners

Capitalist
- Contribution → Money or Property
- Prohibition → cannot engage in same business (XPN : with permission, limited partner)

Industrial
- Contribution → Industry
- Prohibition → cannot engage in any business (XPN : with permission)

What is the effect if prohibition is violated by capitalist? by industrial?

Capitalist
- profits → to partnership
- losses → personally liable

Industrial (either)
- profits → to partnership
- expelled from partnership

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A stipulation excluding capitalist partner to profits is void. True or False?

A stipulation excluding industrial partner to loss is void. True or False?

True, False

Capitalist
- excludes profit → void
- excludes loss → void

Industrial
- excludes profit → void
- excludes loss → valid

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After exhaustion of assets, may liability pa rin
- pro-rata (jointly)

Industrial partners are not liable for losses (based on rules as to profit or loss). This is true in case the partnership assets are exhausted. True or False?

Stipulation Exempting a Partner from Losses
as to 3rd Party → Void
- 3P may collect from industrial since void nga

as to Partners → Valid
- however industrial may ask for reimbursement from other partners since industrial partners are not liable to losses

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At perfection of contract, all partners must contribute equally. True or False?
- XPN : stipulated
- delay → no demand needed

True

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In case of loss, all partners must give additional contribution. True or False?
- XPN : stipulated

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False
- only Capitalist Partner are required (X industrial)

If fail → sell your interest to other partners

debtor = indebted to both partnership and managing partner
both debts = demandable
collector = managing partner

What if receipt is in name of partnership? in name of partner?

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Receipt in Name of Partnership
- applied solely to partnership credit

Receipt in Name of Partner
- applied proportionately to the debts
- debtor may exercise application of payment
(1) MP’s debt is more onerous
(2) debtor choose MP

partner = receives partnership credit
debtor = become insolvent after

The partner who receives must bring it to partnership fund then divided by all partners.

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Yes

Liability of Incoming Partner
- What is the limit of liability from debts before admission? after admission?

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Debts before Admission
- liable up to capital contribution only (XPN : stipulated)

Debts after Admission
- liable up to personal assets

Partnership by Estoppel

As a Partner in Existing Partnership
- all partners consented → partnership liability
- some partners consented → ?

As a Partner in Non Existing Partnership
- those who consented → ?

Consent → may be express or implied

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As a Partner in Existing Partnership
- some partners consented → liable pro-rata (jointly)

As a Partner in Non Existing Partnership
- those who consented → liable pro-rata (jointly)

Distribution of Profits
1. Agreement
2. No agreement
Capitalist → Contribution
Industrial → Just and Equitable

Distribution of Losses
1. Agreement
2. No agreement → Profit Agreement
Capitalist → Contribution
Industrial → Not Liable

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Yes

1 MANAGING PARTNER

In the Articles of Partnership
- What acts can he do?
- Power can be revoked by?

After Constitution
- What acts can he do?
- Power can be revoked by?

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In the Articles of Partnership
- all acts (in good faith), even with opposition
- (1) vote of controlling interest (2) just cause

After Constitution
- all acts (in good faith), even with opposition
- (1) vote of controlling interest

Controlling Interest → not head count

MULTIPLE MANAGING PARTNER

With Stipulation that needs consent of all MP
- follow the stipulation

With Specification of Duties
- “mind your own business”

Without Stipulation and Without Specification
- equal authority
- if someone object → controlling interest of managing partners (same as in 1 managing partner). True or False?

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False
- Head Count of Managing Partners
- if tie → Controlling Interest of All Partners

NO MANAGING PARTNER With Stipulation that needs consent of **all** partners (same as multiple managing partner) - follow the stipulation - if emergency → kahit sino na lang magbotohan WIthout Stipulation - every partner → agent - if alteration in immovable property → need consent in all cases. True or False? - if someone object → controlling interest of managing partners (same as in 1 managing partner). True or False?

True - kahit pa useful para sa partnership yung alteration na yun - if nag iinarte → sought court intervention False - walang managing partner, so - diretso na sa **controlling interest** of **all** partners

Causes of Dissolution 1. Extrajudicial 2. Judicial

Yes

EXTRAJUDICIAL CAUSES Without violation of agreement → no damages - termination of term - express will of a partner / all partners (in good faith) - expulsion of a partner With violation of agreement → with damages Operation of law - naging unlawful na siya bigla - loss of ? - DIC ## Footnote Is insanity an extrajudicial cause?

Before Delivery - loss of specific thing → dissolve - usufruct → dissolve After Delivery - loss of specific thing → **X** - usufruct → dissolve Death, Insolvency, Civil Interdiction ## Footnote No

JUDICIAL CAUSES - **i**nsanity (insolvency → sa extrajudicial **!!!**) - **i**ncapable of performing your part - partnership can only be **c**arried at a loss - **a**cts in bad faith ## Footnote IICA

Yes

Dissolved → not agent anymore (cannot bind the partnership) If the cause of dissolution is ? → notice should be given to partners If the cause of dissolution is ? → no need for notice

- AID = Acts, Insolvency (not insanity), Death - not AID

LIQUIDATION - any partner can be a liquidator. True or False? - if all partners are dead, the legal representative of any of them can be a liquidator. True or False? - if no choice → the court itself will appoint

- false → any partner who has not wrongfully caused the dissolution - false → legal representative of **last surviving** partner (that surviving partner = **solvent**)

Limited Partnership - must comply with form required (**if not** → general partnership) Form Required 1. Name → must have limited or LTD 2. Principal place of business 3. Who are general, who are limited 4. Limited Partners → contributions (cash, property, additional) 5. Due date → time when LP's contribution is to be returned

Yes

Rights of a Limited Partner 1.rightfully demand for return of contribution - upon dissolution / due date of partnership has arrived - 6 months notice to other partners - if not returned → ground for **dissolution** 2.other cases when LP can demand for return of contribution - asset must be sufficient to pay outside creditors 3.be a creditor to the partnership - cannot have collateral - asset must be sufficient to pay outside creditors - if violated → **rescissible**

Yes

Property Rights of a General Partner 1. Rights in Specific Partnership Property 2. Interest in the Partnership 3. Right to Participate in Management Can (1) be assigned? Can (1) be subject to attachment or execution? Can (2) be assigned? Can (2) be subject to attachment or execution?

Specific Partnership Property - **cannot** be assigned - **cannot** be subject to attachment or execution (**XPN** : claim on partnership) - cannot be subject to legal support Interest in the Partnerhip - **can** be assigned → does not dissolve the partnership (**XPN** : stipulated) - **can** be subject to attachment or execution Rights of Assignee 1. profits lang talaga (+ in case of dissolution) 2. remedies in case of fraud of management

Property Rights of a Limited Partner 1. XX 2. Interest in the Partnership 3. XX Can (2) be assigned? Can (2) be subject to attachment or execution? ## Footnote Limited Partner → cannot participate in management

Interest in the Partnerhip - **can** be assigned → does not dissolve the partnership (**XPN** : stipulated) - **can** be subject to attachment or execution Assignment - stated in the certificate - if not → need consent of all partners (general + limited)

Same in assignment, the ff. must be in the certificate or if not, need consent of all partners **Optional Rights of a Limited Partner** 1. to admit additional limited partners 2. to have priority over other limited partners 3. to demand to receive property other than cash ## Footnote Can a partnership admit additional general partners?

Yes ## Footnote Admit additional limited partners → stated in certificate or consent of all Admit additional **general** partners → consent of all **only** (cannot be stated in certificate)

Death, Insolvency, Retirement, Insantity, Civil Interdiction (DIRIC) - General Partner → partnership is dissolved. True or False? - Limited Partner → partnership is dissolved. True or False?

General Partner - Yes (**XPN** : stated in certificate or if not, need consent of all partners) Limited Partner - Yes (**XPN** : maraming LP, requirement kasi na atleast 1 LP)

A stranger can be included in the partnership name. True or False? A limited partner can be included in the partnership name. True or False? An industrial partner can be a limited partner. True or False?

- True → liable as a partner (but no right as a partner) - True → liable as general partner (**XPN** : same surname as general partner) - False → limited partners **cannot** contribute services

General-Limited Partner (GLP) - general as to 3rd parties - limited as to partners

GLP can only happen if stated in certificate **(!!!)**

Distribution of Assets in Liquidation 1. Partnership Creditors 2. ?? 3. ?? 4. ?? ## Footnote General Partnership

2. Loans from partner 3. Partner → with respect to capital 4. Partner → with respect to profits If not sufficient to pay liabilities → habulin sa general partners If naging insolvent yung isang partner → marshalling of assets 1. Separate Creditors 2. Partnership Creditors 3. Owing to partners

Distribution of Assets in Liquidation 1. Partnership Creditors 2. ?? 3. ?? 4. ?? 5. ?? 6. ?? 7. ?? ## Footnote Limited Partnership

2. Limited Partner → loans from partner 3. Limited Partner → with respect to **profits** 4. Limited Partner → with respect to **capital** 5. General Partner → loans from partner 6. General Partner → with respect to **profits** 7. General Partner → with respect to **capital** ## Footnote mauuna lagi profits compared sa capital → whether limited or general

Partnership Flashcards

(40 cards)