Published — April 6, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Aside from general partnership, read also: WHAT IS LIMITED PARTNERSHIP?
-
General partnership is one which has no limited partner
-
In general partnership, business partners share unlimited liability for the debts and obligation of the partnership
-
A general partner may contribute services, cash, or property to the partnership
May a partner limit his contributions to his services only?
In our previous article, we wrote about limited partnership. This time, let us talk about general partnership. In a general partnership, business partners share unlimited liability for the debts and obligation of the partnership. This is contrary to a limited partnership.
A general partner in a general partnership may contribute cash, property, or service (industrial partner). However, an industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so.
What is the extent of the liability of a partner in a general partnership?
The law says:
Every partner is responsible to the partnership for damages suffered by it through his fault, and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. However, the courts may equitably lessen his responsibility if through the partner’s extraordinary efforts in other activities of the partnership, unusual profits have been realized.
Also, all partners, excluding industrial partners, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract.
How should the losses and profits of the partnership be distributed?
The law says:
The losses and profits shall be distributed in accordance with the partnership agreement. If only the share of each partner has been agreed upon, the share of each in the losses shall be in the same proportion.
In the absence of such stipulation, the share of each partner in the profits and losses shall be in the proportion to what he may have contributed, but the industrial partners shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. However, if, besides his services, said industrial partner has contributed capital, he shall also receive a share in the profits in proportion to his capital.
Clearly, among the differences of general and limited partnership is that in the former, business partners share unlimited liability for the debts and obligations of the company while in the latter, some partners will have an unlimited liability, while others have liability equal only to the amount of their capital contribution.
May a person be forbidden from denying that he is a partner? In other words, may a partner be allowed or permitted to deny the existence of a partnership? A related article will be posted in a few days.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.
SUBSCRIBE NOW FOR MORE LEGAL UPDATES!
[email-subscribers-form id=”4″]