Sie sind auf Seite 1von 83

General Provisions of

By: Marian Jane Alumbro
Nilda Vicente

8 seconds starts

Contract of Partnership
Valid contract
juridical person
Articles of Partnership
Legal capacity
secret partnerships
common fund
sharing of profits
sharing of losses

1. The class will be divided into two groups.
2. Each group will choose a representative.
3. The representative will act out the word. (no
4. The group will guess the right term/s.
5. Each group will be given one (1) minute to guess
the right term/s.
6. After one minute and the group did not able to
guess the right term, the representative will reveal
the term. Thereafter, the representative will choose
one member of the group to say something of
substance about the term/s.
However, if the group is able to guess the right
term/s, it will choose a member from the other
group to say something of substance about the

Nature of Partnership
Within the context of Philippine law,
a"partnership"is treated as an artificial
being created by operation of law with a
legal personality separate and distinct
from the partners thereof.
Philippine partnerships operate under the
concept of unlimited liability and unless
otherwise agreed upon by the partners,
each one of them acts as manager and
agent of the partnership and
consequently, their acts bind the

Partnership Governing Law

Unlike corporations whose governing law is a
special law - the Corporation Code of the
Philippines, partnerships in the Philippines
are governed by and covered under Articles
1767 to 1867 of the Civil Code of the
Philippines [circa 1950]. These are the
provisions of law which govern all aspects of
partnerships - from their creation,
formation, existence, operation and
management to their dissolution and
liquidation, including the obligations of the
partners to one another, to the public or
third persons and to the government.

Definition by law
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

Essential Features/Charactersitic
Elements of Partnership(De

1) There must be a contract

2) The partners must have legal capacity to
enter into a contract.
3) There must be mutual contribution of
money, property or industry to a
common fund.
4) The purpose must be to obtain pecuniary
profits and to share the same.
5) The purpose must be lawful, and
6) The articles of co-partnership must not
be kept secret.

1) There must be a Contract

The three essential requisites of a contract must
be complied with: consent, object and cause.
As in other cases of contracts, in order to make an
agreement for partnership valid, there must be
a valid consideration existing between the
partners. Each partner must surrender to the
partnership an interest in his property, labor,
skill, or energy, in accordance with the express
or implied stipulations of their mutual
The contract can be entered into orally or written.

Fiduciary in Nature
Partnership is a form of voluntary
association entered into by the
association. It is a personal relation
in which the element of delectus
personae exists.
What does Delectus personae mean?
It involves trust and confidence
between partners.

In Ortega v. Ca G.R. No. 109248 July 3, 1995, a
partnership that does not fix its term is a
partnership at will.
The birth and life of a partnership at will is
predicated on the mutual desire and consent of
the partners. The right to choose with whom a
person wishes to associate himself is the very
foundation and essence of that partnership. Its
continued existence dependent on the constancy
of the mutual resolve, along with each partners
capability to give it, and the absence of a cause
for dissolution provided by the law itself.

2) The parties must have legal

Only those person with legal capacity to give
consent may enter into a contract of partnership.
Trivia Question: Who cannot give consent to a
contract of partnership?
They are: 1)Unemancipated Minors 2)Insane or
demented persons 3)Deaf mutes who do not
know how to write 4)persons who are suffering
from civil interdiction 5)incompetents who are
under guardianship (Art. 1327, 1329 of the NCC)
Trivia Question: May a juridical person enter into a
contract of partnership?

Yes, in Mervyn v. Bieber, (184 CA 637)
corporations which are expressly authorized
by statute, or there is an express grant of
such authority in the charter, a corporation
has authority to enter into a contract of
Also, there is no prohibition against a
partnership being a partner in another
partnership. When two or more partnerships
combine with each (or with natural person or
persons) other creating a distinct partnership.

3) There must be mutual

Contribution of money,
property or industry

Both real and personal property can be contributed.

Money-Legal Tender of the Philippines not checks,
drafts or other representatives of money.(they
must be cashed first)
Property-License to construct and operate a cock pit
may be given as a contribution to a partnership.
Industry-active cooperation, the work of the party
associated, which may be either personal, manual
efforts or intellectual, and for which he receives
share in the profits of the business, not just salary.

4) The purpose must be to

obtain profits etc.
The purpose must be to obtain profits
and to divide the same among the
partners and that it is necessary that
such profits or benefits shall be
common to all partners.

Sharing of profits
Sharing of gross profits is not
partnership when the agreement is to
divide the gross earning or receipts of a
venture, will not for itself constitute a
partnership as to third persons. It does
not amount to an agreement to share
profits and losses.
Sharing of profits is a prima facie
evidence of partnership because it is an
essential element of the relationship.

When sharing profits not prima

facie evidence of partnership?

One who merely makes a loan or money or credit to the

owner of a business in consideration of a share of its profits
in repayment of such loan or in lieu of, or in addition to
interest for its use does not thereby become a partner in the
Where an employee receives 35% of the net profits, instead,
of a salary, there is no partnership in the absence of any
contract showing the same.
In Navarro v. CA, 222 SCRA 675-679 (1993), a cursory
examination of the evidence presented no proof that a
partnership, whether oral or written had been constituted at
the inception of this transaction. While there may have been
co-ownership or co-possession of some items and/or sharing
of proceeds by way of advances received by both plaintiff
and the defendant, there is no indicative and supportive of
the existence of partnership between them.
The court held in Muasque v.CA, 139 SCRA 533 (1985),
even if there was a falling out or misunderstanding between
the partners such does not convert it into a sham

5) The purpose must be

A partnership cannot be formed for an
illegal purpose and where the thing to be
done is illegal, the contract of partnership
for the purpose of doing such is equally
Art. 1770 of the New Civil Code states,
When an unlawful partnership is
dissolved by judicial decree, the profits
shall be confiscated in favor of the State.

Effect of unlawful purpose of

The Court will refuse to recognize its
existance and will not lend their aid to assist
either of the parties thereto in an action
against the other.
The profits shall be confiscated in favor of
the State.
The instruments and effects of the crime, if
the purpose is a criminal act, may be
confiscated under the provisions of the RPC.
The contributions of the partners shall not
be confiscated.

6) The Articles of Partnership

must not be kept secret
Art. 1775 provides that, associations
and societies, whose articles are kept
secret among the members, and
wherein any one of the members
may contract in his own name with
third persons, shall have no juridical
personality, and shall be governed by
the provisions relating to coownership.

De Leon: What are the

characteristic elements of
partnership? Explain.


Juridicial Personality of
Art. 1768. The partnership has a judicial
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.
Trivia Question: If A and B decide to form a
partnership. How many persons are
3. A, B and the Partnership of A and B.

Art. 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

What is referred to in Art.

What is referred to here is that
registration in SEC is not necessary
for the acquisition of juridical
The contract of partnership is a
consensual contract. Hence it is
perfected from the moment of
consent, and its juridical personality
begins therefrom.

Partnerships like corporations are

subject to absolute jurisdiction,
supervision and control of the SEC

Art. 1769. In determining whether

a partnership exists, these rules
shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each
other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership,
whether such-co-owners or co-possessors do or do not share any profits
made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or
interest in any property from which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie
evidence that he is a partner in the business, but no such inference shall be
drawn if such profits were received in payment:

(a) As a debt by installments or otherwise;

(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the
profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other
property by installments or otherwise. (n)

Trivia Question
If Juan and Pedro are merely co-owners
but Juan represents to Padring that
he and Pedro are partners, can they
be partners as to Padring, a third

The general rule is, no, they cannot be
partners as to Padring, who is a third
person if they are not partners as to
The exception is, where there is estoppel
in Art. 1825 of the Code. So, as to
Padring, Juan and Pedro are partners
even if they are not real partners.

Trivia Question:
Juan and Pedro agree to buy a piece of
land under the condition that each
should pay one-half of the price
thereof, and that the property should
be divided between them. Is there
partnership in the case? (Gallemit v.
Tagbiliran, 20 Phil 241)

Partnership v. Co-ownership
As a general rule, an agreement between
joint-owners of property to carry common
trade or business and to share the profits
and losses thereof will constitute a
A mere community if interest, such as exists
between tenants in common or joint
tenants of real or personal property, does
not make such owners partners or raise a
presumption that partnership exists.

Partnership, once established, has juridical

personality, while a co-ownership as none.
A Partnership is created always by contract, while
co-ownership may exist by operation of law.
A co-owner may dispose of his individual interest
in the common property as an incident inherent
in ownership, a partner has no such power.
The object of partnership is gain, a co-ownership
does not necessarily exist for profit.
The right of a co-owner descent to his heir; those
of a partner (as partner in partnership) do not,
unless expressly stipulated in the contract of

Trivia Case
Juana died leaving heirs, her husband Pedro and her
children. After the partition, the properties were not
distributed to Pedro and the other heirs. Instead Pedro,
as administrator, used such properties in business by
leasing or selling them and investing the income
derived therefrom and the proceeds from the sales
thereof in real properties and securities. Every Year
the heirs returned from income tax purposes their
shares in the net income derived from the properties
and investments, and paid the corresponding income
taxes. However, the heirs did not actually receive their
shares which were left in the hands of Pedro, the
administrator. The BIR decided that the heirs had
formed an unregistered partnership and therefore
subject to the corporate income tax pursuant to
Section 24 and 84 (b) of the Tax Code.

Question 1: Is the BIR correct in contending

that the heirs had formed an unregistered
partnership? When did the unregistered
partnership begin?

Yes, the BIR is correct in contending that the heirs had formed an
unregistered partnership from the partition of the properties
of the deceased Juana was approved by the court. From the
moment the petitioners allowed not only the incomes from
their respective shares from the inheritance but even
inherited properties themselves to be used by Pedro as a
common fund in undertaking several transactions or in
business, with the intention of deriving profit to be shared by
them proportionally, such act was tantamount to actually
contributing such income to a common fund, and in effect,
they thereby formed an unregistered partnership within the
purview of the above-mentioned provisions of the Tax Code.
However, up until the time the partition was approved by the
court, the heirs are not considered to have formed an
unregistered partnership. Before the partition and distribution
of the estate of the deceased, all the income thereof does
belong commonly to all the heirs, obviously, without them
becoming thereby unregistered co-partners.

Question 2: Are the heirs, as

unregistered partnership liable
to pay corporate income tax?

Yes, the heirs, as constituting an unregistered

partnership, are liable to the corporate income
tax. The Court differentiated the concept of
partnership under the civil code from that of
unregistered partnership and held that, such
unregistered partnership are considered as
corporations under Sec. 24 and 84 (b) of the
For purpose of tax on corporations, our NIRC,
includes these partnerships- with the exception
only for duly registered general co-partnershipwithin the purview of the term corporation.

Question 3: May the heirs deduct from the income

tax due their unregistered partnership the income
tax they paid on their individual incomes of which
the share in the net profit of their unregistered
partnership is a part?

No, the heirs may not deduct the

individual income taxes they paid from
the income tax due their unregistered
partnership. The partnership profits
distributable to the partners should be
deduced by the amounts of income tax
assessed against the partnership.
For more details. Read the case: Oa v.
CIR, May 25, 1972, 45 SCRA 74, 81-82.

Partnership V. Joint Venture

Joint account exists when one person (called silent
partner) contributes capital to another who is in
business (called ostensible partner) who acts in his
own name.
1) A partnership has a firm name, while a joint account
has none and it is conducted in the name of the
ostensible partner;
2) A partnership has a juridical personality. While a joint
account has no juridical personality, and that action
must be brought against the ostensible partner only;
3) A partnership is a common fund, while a joint account
has no common fund;
4) Liquidation of a partnership may be entrusted to other
persons, the ostensible partner always liquidates the
joint account.

Partnership V. Conjugal
1) An ordinary partnership is created by the will of the
parties whereas a conjugal partnership arises from the
mere celebration of marriage, that is, by operation of law;
2) In an ordinary partnership, it is the agreement of the
parties that determines its object, duration, etc. whereas
in a conjugal partnership, it is the law that regulates such
3) In an ordinary partnership, the profits are distributed in
accordance with the agreement of the the parties, and in
the absence thereof, in accordance with the provisions of
law, whereas in a conjugal partnership, the profits are
always divided equally between the spouses.
4) In an ordinary partnership, all partners are, in the absence
of an express agreement vested with the rights of
management, whereas in a conjugal partnership it is
almost always the husband who manages the same.

Joint Venture, A form of

The legal concept of a join venture is of common law
origin. It is no precise legal definition, but it has
been generally understood to mean an
organization formed for some temporary purpose.
The main distinction cited by most opinions in
common law jurisdications is that the partnership
contemplates a general business with some
degree of continuity, while the joint venture is
formed for the execution of a single transaction,
and thus of a temporary nature.
A corporation though cannot enter into a partnership
contract, may enter into a joint venture with

Example of Joint Venture

Hypor Partnership Strong in Philippines
NETHERLANDS - Just two and a half years ago, what began as a development project, is
now a prime example of how business to business co-operation can lead to longterm sustainable development - with additional benefits to environmental initiatives
and animal welfare.
Hypig was formed through the signing of a joint venture agreement in June 2005
between Hypor B.V. (a Hendrix Genetics company, Holland) and Holly Farms Inc.
(Bounty Fresh Food group, the Philippines).
This joint venture was precipitated by a contract Hypor signed in late 2004 with the
International Business and Cooperation Agency of the Dutch government (EVD) to
set up a Bio-Hypor breeding farm on Mindanao. The agreement was made through
the agency's Programme for Cooperation with Emerging Markets (PSOM). A piece of
land complying with the Hypor's bio-security requirements was found in barrio
Lantapan, Malaybalay, Bukidnon province.
The Kelsey farm lies amid banana and pineapple plantations, with no other animal farms
in the vicinity. The barns were constructed by December 2005, and 270 nucleus
sows and boars from Hypor Canada arrived in February 2006. By this time Hypig felt
the demand was greater than originally forecast and another shipment of pure line
Hypor pigs was delivered.

Art. 1771. A partnership may be constituted in any form, except

where immovable property or real rights are contributed thereto,
in which case a public instrument shall be necessary. (1667a)
Art. 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.
Failure to comply with the requirements of the preceding
paragraph shall not affect the liability of the partnership and the
members thereof to third persons. (n)
Art. 1773. A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said property
is not made, signed by the parties, and attached to the public
instrument. (1668a)
Art. 1774. Any immovable property or an interest therein may be
acquired in the partnership name. Title so acquired can be
conveyed only in the partnership name. (n)
Art. 1775. Associations and societies, whose articles are kept secret
among the members, and wherein any one of the members may
contract in his own name with third persons, shall have no
juridical personality, and shall be governed by the provisions
relating to co-ownership.

The requirement of a public instrument were immovable

property or real rights are contributed is only in order that
the contract of partnership may be effective with respect
to third persons, but as far as the partners themselves are
concerned, said contract is valid and effective, not only
could they compel each other to reciprocally comply with
the required formalities from the moment the contract is
entered into, but the partners can also mutually require
each other to fulfill all the obligations they have incurred.
Art. 1773 complements the provisions of Art. 1771,
because the execution of public instrument would serve no
purpose if the inventory of the real property contributed is
omitted. With out said inventory, the contract could not be
registered in the register of property, and such
contributions to the partnerships would no way prejudice
third persons who, moreover, might evidently defrauded in
their transactions with the partnership, because of their
belief in the efficacy of the guaranty which said property
might constitute. It will be noted that where the inventory
is not made or signed by the parties and attached to the
public instrument the contract of partnership is void.

The most important single central

fact about a free market is that no
exchange takes place unless both
Milton Friedman


As to extent of its SUBJECT MATTER

the following:
a) Property which belonged to
each of the partners at the time of
the constitution of the partnership
b) Profits which they may
acquire from all property contributed


- comprises all that the partners may
acquire by their industry or work
during the existence of the partnership
Note: Persons who are prohibited from
giving donations or advantage to each
other cannot enter into a universal
partnership (Art. 1782).

Commissioner of Internal Revenue v. Suter

A, B and C formed a limited partnership to
engage in the importation, marketing and
operation of radios, television sets and
amusement machines, their parts and
accessories, with B and C as limited
partners. Subsequently, A and B got
married and thereafter, C sold his share to A
and B. So, A and B filed a separate income
return for the limited partnership and a
consolidated return for them as spouses.

Whether or not the partnership
was dissolved after the marriage
of A and B and the subsequent
sale to them by C of the latters

The firm was not a universal partnership, but
a particular one. It follows that the
partnership was not one that A and B were
forbidden to enter under Art. 1782. Nor could
the subsequent marriage of the partners
operate to dissolve it, such marriage not
being one of the causes provided for that
purpose by law.
Article 1782 Persons who are prohibited
from giving each other any donation or
advantage cannot enter into a universal


its objects:
i. Determinate things
ii. Their use or fruits
iii. Specific undertaking
iv. Exercise of profession or

a. GENERAL PARTNERSHIP - consists of general
partners who are liable pro rata and
subsidiarily and sometimes solidarily with
their separate property for partnership debts.
b. LIMITED PARTNERSHIP - one formed by 2 or
more persons having as members one or
more general partners and one or more
limited partners, the latter not being
personally liable for the obligations of the

a. PARTNERSHIP AT WILL - one in which
no time is specified and is not formed
for a particular undertaking or
venture which may be terminated
anytime by mutual agreement.
b. PARTNERSHIP WITH A FIXED TERM the term for which the partnership is
to exist is fixed or agreed upon or one
formed for a particular undertaking.

a. DE JURE PARTNERSHIP - one which
has complied with all the legal
requirements for its establishment.
b. DE FACTO - one which has failed to
requirements for its establishment.

a. ORDINARY OR REAL PARTNERSHIP one which actually exists among the
partners and also as to 3rd persons.
which in reality is not a partnership
but is considered a partnership only
in relation to those who, by their
conduct or omission, are precluded
to deny or disprove its existence.

a. SECRET PARTNERSHIP - one wherein
the existence of certain persons as
partners is not avowed or made
known to the public by any of the
b. OPEN OR NOTORIOUS PARTNERSHIP one whose existence is avowed or
made known to the public by the
members of the firm.

PARTNERSHIP - one formed for the
transaction of business.
PARTNERSHIP - one formed for the
exercise of a profession.


Edison Electric Light Co.

Thomas Edison and J.P. Morgan and the Vanderbilts
Founded in 1880
The electric light bulb catapulted Thomas Edison to
fame and fortune. But Edison, like many
entrepreneurs with more ideas than capital, needed
financial partners to fund his inventions. Throughout
the 1870s and 1880s, Edison received funding from
a group of wealthy investors, including J.P. Morgan
and the Vanderbilt family, helping lay the
groundwork for what eventually became the Edison
Electric Light Co. In 1879, Edison demonstrated the
incandescent electric light bulb to his backers and
launched it publicly shortly thereafter. Three years
later, Edison watched as the first commercial central
power system was installed in Manhattan. By 1887,
121 Edison central power stations spanned the

Thomas Edison and J.P. Morgan and the


Warner Brothers
Sam, Jack, Albert, and Harry Warner
Founded in 1923
The sons of Polish-born Jewish immigrants, Sam,
Jack, Albert, and Harry Warner co-founded what
would become Warner Bros. Studios. They got their
start in the early 1900s working in film production
and distribution. They ran a traveling movie
business, established their own movie house, and
began producing their own films when the cost of
rentals became too steep. Sam Warner is credited
with ending the silent film era after he obtained the
technology that allowed his studio to produce the
first feature-length talkie, The Jazz Singer, which
the studio released in 1927. The blockbuster film
(which grossed some $3 million) established
Warner Bros. as a major player and revolutionized
the film industry.

McDonalds (MCD)
Richard and Maurice McDonald
Founded in 1948
The New Hampshire-born brothers moved to
southern California in the late 1920s with the
goal of opening their own business and
earning $1 million before they hit 50. After an
unsuccessful attempt to break into the movie
business, they opened and ran a hot dog stand
and a barbecue restaurant, gaining experience
they would later use to pioneer the fast-food
industry. In 1948, the brothers reinvented their
McDonald's Famous BBQ, firing their car hops,
slashing the number of items on the menu,
getting rid of utensils and plates, and turning
the kitchen into a mechanized assembly line.

Hewlett-Packard (HP)
Bill Hewlett and David Packard
Founded in 1939
After graduating with degrees in electrical engineering from
Stanford in 1934, Bill Hewlett and David Packard forged a
friendship during a two-week camping and fishing trip in
Colorado. Four years later, the pair began working part-time
on a product based on Hewlett's study of negative feedback in
a rented Palo Alto garage with $538 in cash and a used drill
press. The result was the HP200A, an audio oscillator designed
to test sound equipment. One of their first customers was Walt
Disney Studios (DIS), which purchased eight of the devices to
test a new sound system for the movie Fantasia.
In 1939, the men formalized their partnership, flipping a coin
to decide their startup's name. Hewlett-Packard continued to
create innovative technology products throughout the 1940s.
It also become known for its equally innovative open
corporate culture and management style. By 1942, HP had
eight employees and $522,803 in yearly revenue. In 1961, the
company was earning $87.9 million and was listed on the New
York Stock Exchange. Today, the company that introduced
laser jet printers, touch screens, and personal computers is a
global behemoth with $104.3 billion in annual sales.

Hewlett-Packard (HP)

Microsoft (MSFT)
Bill Gates and Paul Allen
Founded in 1975
Back in 1968, a computer club meeting about BASIC
programming at Seattle's private Lakeside School
brought Gates and Allen together. The two students
soon became obsessed with programming a
mainframe of a local computer and quickly saw the
future of micro-processing. However, it was an article
in Popular Mechanics about personal computers that
triggered their realization that writing and selling
software was the new frontier. Fast forward to the
early 1970s. Allen, who was three years older than
Gates, went to work for Honeywell (HON) in Boston,
and Gates enrolled at Harvard. In 1974, the pair
devised a BASIC platform for the Altair 8800 in Gates'
dorm room and sold it, earning Gates disciplinary
charges from the university for running a business in
his dorm. A year later, Gates (who dropped out of
Harvard) and Allen formed Microsoft, which today is
the world's largest software company.

Bill Gates and Paul Allen

Apple (AAPL)
Steve Jobs and Steve Wozniak
Founded in 1976
College dropouts, Steve Jobs and Steve Wozniak met in the
early 1970s when Jobs was attending lectures at HewlettPackard, where Wozniak worked. The two were also involved
in the Homebrew Computer Club in Silicon Valley, where they
experimented with hardware and software. Soon they
developed an idea for a new kind of personal computer. To
raise money for their new venture, they sold off some of their
programmable HP calculator.
The pair blended Wozniak's computer and software prowess
and Jobs' marketing genius to build the first Apple computer
in Jobs' family garage in 1976. The first single-board
computer with onboard ROM and a video interface,
revolutionized computer functionality, and design. They sold
their first 50 computers to the Byte Shop in Mountain View,
Calif. In 1980, the company went public, making both
multimillionaires. Today, Apple is a $32.4 billion company
known for its innovative products, ranging from the
Macintosh to the iPod to the iPhone.

Steve Jobs and Steve Wozniak

Google (GOOG)
Larry Page and Sergey Brin
Founded in 1998
Page and Brin (both the sons of academics, economists, and
mathematicians) met working on their doctorates in computer
science at Stanford University in 1995. Together, they created
a proprietary algorithm for a search engine, with the goal of
organizing the vast amount of information available on the
Net. Initially called BackRub, the software catalogued search
results according to the popularity of pages. Fairly quickly it
became apparent that in most cases the most popular results
were also the most useful. Presto, another game changer was
In 1998, the pair dropped out of Stanford, changed their
startups name to Google, set up shop in a friend's garage,
and raised about $1 million in capital from friends, family, and
other investors. Initially, Google received 10,000 queries a
day (today that number is estimated at 235 million) and in
1999 the pair received $25 million in venture-capital funding.
Five years later, Google went public, opening at $85 a share.
Arguably the world's No. 1 Internet search engine, last year
the company earned $16.5 billion in salesmost of which was
generated through ad sales.

Larry Page and Sergey Brin

Is a Business Partnership
the Right Choice for You?
Starting a business with a partner
offers many benefits, not the least of
which is having someone to share
the many responsibilities of running
a business. But partnerships can
quickly go bad if you don't give it
ample forethought and planning.
Patricia Schaefer

The Sam-Rachel Partnership

Ten years ago, Samantha was sitting in her
best friend Rachel's kitchen, and an idea was
born for them to start a business together.
Their only consideration was the excitement
they felt. They soon had their first client, and
agreed they would each work an equal
amount of hours and split their profits 50/50.
Within a year, their client base increased to
the point that it allowed them to each work
their goal of 30 hours per week.

After a few years, Rachel's time on the

job and quality of work suffered. For
every hour of work Rachel performed,
Samantha was putting in two. Clients
commented to Samantha about their
performance. Rachel was sensitive by
nature and exploded in teary screams
when Samantha tried to gently tell her
that the quality of her work had

Instead of performing client services

transitioned the business whereby
each was independently attending to
client needs. A few years later,
Rachel was down to one client while
Samantha's client base was teeming.
Their partnership soon dissolved, and
so did their friendship.

Thought to Ponder
This real-life scenario is just one
testament to the fact that a business
partnership formed without necessary
forethought is likely to be doomed to
failure. With the proper planning and
consideration, though, a partnership
can be an unequivocal success. It is
the simplest and least expensive coowned business arrangement.

Some possible pros:

Shared cost of start-up.

Shared responsibilities and work.
Shared business risks and expenses.
Complementary skills and additional
contacts of each partner can lead to
the achievement of greater financial
results together than would be
possible apart.
Mutual support and motivation.

Some possible cons:

Partners in a general partnership are jointly and
individually liable for the business activities of the other.
If your partner skips town, you'll be liable for all the
debts, not just half of them.
Shared profits.
You do not have total control over the business.
Decisions are shared, and differences of opinion can lead
to disagreements, a "falling out," or even one partner
buying out the other.
A friendship may not survive a partnership. Keep in mind
John D. Rockefeller's famous words: "A friendship
founded on business is a good deal better than a
business founded on friendship."

Are you the business

partner type?
A business match is much like a
marriage, and just as one would
normally take great care, time and
consideration in the selection of a
mate, so it should be in the selection
of a business partner.

Dating Period
Do we have the same motivation, values
and similar work habits?
Do we have a similar vision, ideas and
objectives about how to run the business?
Is each of our strong points and skills
complementary to one another?
Are we both able to communicate well
with one another in a pleasant, respectful
and comfortable manner?
Do you trust this individual?

It is rare to find a business partner

who is selfless. If you are lucky it
happens once in a lifetime.
Michael Eisner

All owners are subject to unlimited personal
liability for the debts, losses and liabilities of
the business (except in cases of limited
partnerships and limited liablity partnerships).
Individual partners bear responsibility for the
actions of other partners.
Poorly organized partnerships and oral
partnerships can lead to disputes among

How to register a PARTNERSHIP

with the Philippine SEC

Verifyand reserve the proposed partnership name. You could do this the hard
way, at the SEC Verification Unit, located at the SEC Building, EDSA, Greenhills,
Mandaluyong City (right across the Philippine Overseas Employment
Administration [POEA] and the EDSA Shrine). If you want to make your life a bit
easier, you could do the verification and registration online, through the
SEC-iRegister, a 24-7 portal. After paying the reservation fee, you will get a Name
Verification Slip, which is submitted together with the other requirements.


Prepare the Articles of Partnership. This is equivalent to the Articles of

Incorporation, which is one of the required documents for corporations.


Prepare the: (i) Written Undertaking to Change Partnership Name by any Partner;
and (ii) Registration Data Sheet. There are additional requirements for certain
partnerships, like customs brokerages, which are required to submit the customs
broker licenses and professional tax receipts (PTR) of at least two partners.


File the complete documents with the SEC, upon payment of the requisite filing
fees. The SEC website,, offers an on-line calculator for
your estimated registration fees to pay.

Should need a more detailed process you can always check out the
Securities and Exchange Commission .

Articles of Partnership
While the partnership relation may be
informally created and its existence proved
by the manifestation of the parties, it is
customary to embody the terms of the
association in a written document. The
Articles of Partnership states the name,
nature or purpose and location of the firm,
and defining, among others, the powers,
rights, duties, and liabilities of the partners
among themselves, their contributions, the
manner by which the profits and losses are
to be shared, and the procedure for
dissolving the partnership.

Video Conference from Atty.

Zachery Mc Nathan Alvarado

Look for your report partner
Get a bondpaper from the reporter
You want to make form a business partnership and establish
the following establishment: (choose)
-Fishball Vendor
-Balot Business
-Sarisari Store
-Internet Caf
-Load Station
-Barbeque Station
-Ice Cream Shop
Make your own Articles of Partnership and present your
business and AOP to the class. Use your imagination. Act as
if you are truly making a business to make it more realistic.
(Sample is in .PDF form)