Explain Nature OF Partnership PDF

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Nature of Partnership...

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Engage - Partnership Explained A partnership is a single business in which two or more people share ownership. Each partner contributes to all aspects of the business, including money, property, labor, or skill. In return, each partner shares in the profits and losses of the business. Because partnerships entail more than one person in the decision-making process, it’s important to discuss a wide variety of issues up front and develop a legal partnership agreement. This agreement should document how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership (bring in new partners or buy out current partners), and how to dissolve the partnership. Although partnership agreements are not legally required, they are strongly recommended, and it’s considered extremely risky to operate without one.

Nature of Partnership Nature of Partnership

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Disadvantages Registration requirements DEFINITION A partnership is defined in Article 1767 of the Civil Code of the Philippines as " a contract whereby two or more persons bind themselves to contribute money, property, or industry into a common fund with the intention of dividing profits among themselves." In order to form the partnership, partners have to invest in the entity. The investment may be in the form of fixed assets which is taken in the partnership business at the value as mutually decided among the partners. The investment may be in the form of cash as well.

CHARACTERISTICS OF A PARTNERSHIP 1.

Mutual agency. Any partner may act as an agent of the partnership in conducting its affairs.

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Unlimited liability. The personal assets (assets not contributed to the partnership) of any partner may be used to satisfy the creditors’ claims of the

partnership, if the partnership assets are not enough to settle the liabilities to outsiders upon liquidation, 3.

Limited life. A partnership may be dissolved at any time by action of the partners or by operation of law,

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Mutual participation in profits. A partner has the right to share in partnership profits.

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Legal entity. A partnership has legal personality separate and distinct from that of each of the partners.

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Co-ownership of contributed assets. Property contributed to the partnership are owned by the partnership by virtue of its separate legal personality.

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Income tax. Partnerships, except general professional partnerships (i.e., those organized for the exercise of professions like CPAs, lawyers, engineers, etc.), are subject to income tax at the rate of 34% in 1998, 33% in 1999 and 32% in the fiscal year 2000 and; thereafter.

ADVANTAGES OF A PARTNERSHIP 1.

It is easy and inexpensive to organize, as it is formed by a simple contract between two or more persons.

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The unlimited liability of the partners makes it reliable from the point of view of creditors.

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The combined personal credit of the partners offers better opportunity for obtaining additional capital than does a sole proprietorship.

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The participation in the business by more than one person makes possible a closer supervision of all its activities.

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The direct gain to the partners is an incentive to give close attention to the business.

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The personal element in the characters of the partners is retained.

DISADVANTAGES OF A PARTNERSHIP 1.

The personal liability of a partner for firm debts deters many from investing capital in a partnership.

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A partner may be subject to personal liability for the wrongful acts or omissions of his associates.

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It is less stable because it can easily be dissolved. There is divided authority among the partners. There is constant likelihood of dissension and disagreement when each of the partners has the same authority in the management of the firm

KINDS OF PARTNERSHIPS As to Activity 1. Trading Partnership - one whose main activity is the manufacture or the purchase and sale of goods. 2. Nontrading Partnership - one which is organized for the purpose of rendering services.

As to Object 1. Universal Partnership 2. Universal Partnership of All Present Property - one in which the partners contribute all the property which actually belong to each of them, at the time of constitution of the partnership, to a common fund with the intention of dividing the same among themselves as well as the profits which they may acquire therewith. All assets contributed to the partnership and subsequent acquisitions become common partnership assets. 3. Universal Partnership of All Profit - one which comprises all that the partners may acquire by their industry or work during the existence of the partnership and the usufruct of movable or immovable property which each of the partners may possess at the time of the institution of the contract. Partnership assets consist of assets acquired during the life of the partnership and only the usufruct or use of assets contributed at the time of partnership formation, The original movable or immovable property contributed do not become common partnership assets. 4. Particular Partnership - one which has for its object determinate things, their use or fruits, or a specific undertaking or the exercise of a profession or vocation.

As to Liability of Partners 1. General Co-Partnership - one consisting of general partners who are liable prorata and sometimes solidarily with their separate property for partnership liabilities. 2. Limited Partnership - one formed by two or more person having as members one or more general partners and one or more limited partners, who as such are not bound by the obligations of the partnership. The word LIMITED or LTD.; is added to the name of the partnership to inform the •public that it is a limited partnership.

As to Duration 1. Partnership at Will - one for which no term is specified and is not formed for a particular undertaking or venture and which may be terminated any time by mutual agreement of the partners or the will of one alone. 2. Partnership with a Fixed Term - one in which the term or period for which the partnership is to exist is agreed upon. It may also refer to a partnership formed...