How to Form a Partnership in the Philippines


If you are interested in engaging in business or practicing your profession with some colleagues, a partnership may be the proper vehicle.

The Philippine Civil Code provides for a definition of a partnership as follows:

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 profession.

A partnership is different from a corporation in many ways. First, there is no time limit for the existence of the partnership as this depends on the agreement of the parties. On the other hand, a corporation can exist for a period not exceeding fifty (50) years. Second, as to the beginning of juridical personality, a partnership becomes a juridical person from the time the contract begins while in a corporation, it only becomes a juridical person upon registration with the Securities & Exchange Commission (SEC). Third, although a partner may transfer his interest in a partnership to another, the transferee does not automatically become a partner unless all the other partners give their consent. However, in corporations, when the shares of stock are transferred to another, the transferee becomes a stockholder of the corporation. Fourth, as to liability to third persons, partners may be held liable with their private and personal property while in corporations, the stockholders are generally liable only to the extent of their subscribed capital stock. Lastly, a partnership may be dissolved due to the insolvency, civil interdiction, death, insanity or retirement of any of the partners while such grounds do not dissolve a corporation.

Like a corporation, a partnership has a separate juridical personality. Even if the partnership failed to register with the SEC, it still has a separate juridical personality. Thus, the partnership, as a separate person can acquire its own property, bring actions in court in its own name and incur its own liabilities and obligations. A partnership action is embodied in a Partners’ Resolution which is similar to a corporation’s Board Resolution.

Partnerships are recorded with the Securities & Exchange Commission (SEC). The following requirements must be submitted with the SEC:

1. Name Verification Slip with the reservation of the partnership name
2. Articles of Partnership
3. Registration Data Sheet
4. Affidavit of a partner undertaking to change partnership name
5. Certificate of Bank Deposit

If a partnership has foreign partners, the following additional requirements must be filed:
1. SEC Form No. F-105
2. Bank certificate on the capital contribution of the partners
3. For foreign partners who want to register their investments with the Bangko Sentral ng Pilipinas, proof of the remittance

The following information should also be provided:

1. Name of the partnership
2. Principal office address
3. Telephone number of the partnership
4. Name, citizenship, address, birthday and TIN of the partners
5. Capital contribution of the partners
6. Purpose of the partnership

A partner has certain rights in the partnership. Thus, he has a share in the profits of the partnership and has the right to a specific partnership property. As a partner, he has a right to participate in the management, inspect partnership books and can in fact, demand for a formal accounting. However, rights have corresponding obligations. Hence, a partner is obligated to give his contribution and share in the losses.

There are many types of partners, the common types of which are:

1. General partner
2. Industrial partner (one who furnishes labor or industry)
3. Capitalist partner (one who give capital)
4. Limited partner (one who is liable only to the extent of his contribution)

Anent the liability, all partners are liable to third persons. However, as between the partners, the industrial partner is not liable for losses while a limited partner is liable only to the extent of his contribution.

Nicolas & De Vega Law Offices is a full service law firm in the Philippines. You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines. You may also call us at +632 4706126+632 4706130+632 4016392.