PARTNERSHIP

PARTNERSHIP - by the contract of partnership, 2 or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves

ESSENTIAL FEATURES:
1. There must be a valid contract
2. The parties must have legal capacity to enter into the contract
3. There must be a mutual contribution of money, property, or industry to a common fund
4. The object must be lawful
5. The purpose or primary purpose must be to obtain profits and divide the same among the parties

NO PRESUMPTION OF PARTNERSHIP FROM RECEIPT OF PROFITS:
1. As debt by installment
2. As wages or rent
3. As annuity
4. As interest on loan
5. As consideration for sale of goodwill of business/other property by installments

SIMILARITIES BETWEEN A PARTNERSHIP AND A CORPORATION
1. Both have juridical personality separate and distinct from that of the individuals composing it
2. Both can only act through agents
3. Both organizations are composed of an aggregate of individuals (except corporation sole)
4. Both distribute profits to those who contribute capital to the business
5. Both can only be organized when there is a law authorizing their organization
6. Both are taxable as a corporation

EFFECTS OF UNLAWFUL PARTNERSHIP
1. The contract is void ab initio and the partnership never existed in the eyes of the law
2. The profits shall be confiscated in favor of the government
3. The instruments or tools and proceeds of the crime shall also be forfeited in favor of the government
4. The contributions of the partners shall not be confiscated unless they fall under no. 3

FORM OF PARTNERSHIP CONTRACT

GENERAL RULE: No special form is required for the validity of the contract
EXCEPTIONS:
1. Where immovable property/real rights are contributed
a. Public instrument is necessary
b. Inventory of the property contributed must be made, signed by the parties and attached to the public instrument otherwise it is VOID
2. Where capital is P3,000 or more, in money or property
a. Public instrument is necessary
b. Must be registered with SEC

Hi. How can an existing General Partnership change its status to a Limited Partnership? As the same company name and the same partners will be retained. One shall be a General Partner & the other shall be just a Limited Partner. thanks!