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The Law on Partnership and

Private Corporations
Author: Hector S. De Leon
2013 Revised Edition

Prepared by
ANGELO ANDRO M. SUAN, CPA
PARTNERSHIP
(ARTICLES 1767-1867, CIVIL CODE)
GENERAL PROVISIONS
ARTICLE 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.
Other definitions of partnership:
 An association of two or more persons to carry

on as co-owners a business for profit.


 Is a joint undertaking to share in profit and

loss.
Partnership for the exercise of a profession:
 A profession is a calling in the preparation
for or practice of which academic learning is
required and which has for its prime purpose
the rendering of public service.
 Paragraph 2 relates to a general professional
partnership or a partnership for the exercise of
a profession. Strictly speaking, the practice of a
profession is not a business or an enterprise for
profit.
Note: the law does not allow individuals to
practice a profession as a corporate entity. The
reason is that personal qualifications (e.g., age,
good moral character, college degree) for such
practice cannot be possessed by a corporation.
Characteristics/elements of Partnership
 Consensual

 Nominate

 Bilateral

 Onerous

 Commutative

 Principal

 Preparatory
Essential Features of Partnership
 There must be a valid contract

 Parties must have legal capacity to enter into

the contract
 There must be mutual contribution of money,

property or industry to a common fund


 The object must be lawful

 The purpose or primary purpose must be to

obtain profits and to divide the same among


the parties.
ARTICLE 1768: The partnership has a juridical
personality separate and distinct from that of
each of the partners, even in case of failure to
comply with the requirements of Article 1772,
first paragraph.
Case:
In the partnership X & Co., in which A and B are
partners, there are three (3) distinct persons,
namely,
 partnership X & Co,

 A, and

 B
 As a consequence of the distinct legal personality
possessed by X & Co., it may be declared insolvent
or bankrupt even if A and B are not; it may enter
into contracts and may sue and be sued; and the
death of either A and B is not ground for the
dismissal of a pending suit against X & Co.
 Neither A nor B may sue on a cause of action
belonging to X & Co., in his own name and for his
own benefit. A and B cannot be held liable for the
obligations of X & Co. To creditors except as
provided in Article 1816.
Effect of failure to comply with statutory
requirements
 Under Article 1772, this article makes it clear

that even in case of failure to comply with the


requirements of Article 1772, with reference to
the execution of a public instrument and
registration of the same with the SEC in cases
when partnership capital exceeds P3,000.00.
End of Discussion

Study Articles 1769 – 1809 for next meeting’s oral


recitation

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