Published — July 22, 2022
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.
After reading “Corporation vs. Partnership”, read also “Dissolution of Partnership“
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Business organizations are entities formed for the purpose of carrying on commercial enterprise.
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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.
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A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.
Business organizations are entities formed for the purpose of carrying on commercial enterprise. The basic types of business organizations include sole proprietorship, partnerships, joint accounts, business trusts, joint venture, cooperative, syndicate, and corporations.
What is a Partnership?
The law says:
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. (Article 1767, New Civil Code of the Philippines)
With this, the essential elements of a partnership include: (a) an agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits among the contracting parties. (Evangelista vs. Collector of Internal Revenue, G.R. No. L-9996, October 15, 1957)
What is a Corporation?
The law says:
A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence. (Section 2, Revised Corporation Code of the Philippines)
As such, the attributes of a Corporation include, first, it is an artificial being. Second, it is created by operation of law. Third, it enjoys the right of succession. And lastly, it has the powers, attributes, and properties expressly authorized by law or incident to its existence.
What are the differences between a Partnership and a Corporation?
As to the creation and governing law, a Partnership is created by mere agreement of the parties as governed by the New Civil Code, whereas a Corporation is created by operation of law and governed by the Revised Corporation Code.
As to the commencement of juridical personality, a Partnership, it being a contract, begins from the moment of the meeting of the minds of the partners, whereby they bind themselves with respect to the other (Article 1305, New Civil Code) or from the moment of the execution of the contract, unless it is otherwise stipulated (Article 1784, New Civil Code) whereas, a Corporation beings from the date of issuance of the Certificate of Incorporation. (Section 14, Revised Corporation Code)
As to the term of existence, the term of a Partnership may be established for any period of time as stipulated by the partners, whereas, a Corporation shall have perpetual existence unless the certificate of incorporation provides otherwise. (Section 35(b), Revised Corporation Code)
As to the number of incorporators, two (2) or more persons may form a Partnership (Article 1767, New Civil Code), whereas, in a Corporation, any person, partnership, association or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. (Section 10, Revised Corporation Code)
As to the powers, in a Partnership, generally, partners may exercise any power authorized by the partners, whereas, in a Corporation, incorporators may exercise only such power as may be granted by law, its articles of incorporation, those implied, and those incidental thereto.
As to the manner of management, in a Partnership, when the manner of management is not agreed upon, all the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership (Article 1803(1), New Civil Code), whereas, in a Corporation, the Board of Directors or Trustees shall exercise the corporation powers, conduct all businesses, and control all properties of the corporation unless otherwise provided. (Section 22, Revised Corporation Code)
As to dissolution, a Partnership may be dissolved any time by the express will of any partner, who must act in good faith, when no definite term or particular is specified (Article 1830(1)(b), New Civil Code), it may likewise be dissolved caused by the act, death or insolvency of a partner (Article 1833, New Civil Code) whereas, a corporation can only be dissolved with the consent of the State. Death or insolvency of shareholders cannot dissolve the corporation.
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.
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