Partnership and Corporation

• Partnership

  Two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing profits among themselves.
• Characteristics of a Partnership

  Mutual Agency

  Unlimited Liability

  Limited Life

  Mutual Contribution

  Co-ownership of Contributed Assets

  Division of Profits
• Mutual Agency

  Pak one pak all
• Unlimited Liability

  Liable up to personal asset.
• Limited Life

  Easily dissolves
• Mutual Contribution

  Contribution of money, property or industry to a common fund.
• Co-ownership of Contributed Assets

  Net assets are owned by the partnership.
• Division of Profits

  Intention of Partnership.
• General Partner

  One who is liable to the extent of his separate property after all the assets of the partnership are exhausted.
• Limited Partner

  One who is liable only to the extent of his capital contribution. He is not allowed to contribute industry or services only.
• Capitalist Partner

  One who contributes money or property to the common fund of the partnership.
• Industrial partner

  One who contributes his knowledge or personal service to the partnership.
• Managing Partner

  One whom the partners has appointed as manager of the partnership.
• Liquidating Partner

  One who is designated to wind up or settle the affairs of the partnership after dissolution
• Dormant Partner

  One who does not take active part in the business of the partnership and is not known as a partner.
• Silent Partner

  One who does not take active part in the business of the partnership though may be known as a partner.
• Secret Partner

  One who takes active part in the business but is not known to be a partner by outside parties.
• Nominal partner or partner by estoppel

  One who is actually not a partner but who represents himself as one.
• Types of Partnership

  As to Object

  As to Liability

  As to Duration

  As to Purpose

  As to Legality of Existence
• As to Object

  Universal partnership of all present properties

  Universal Partnership of profits

  Particular Partnership
• As to Liability

  General

  Limited
• As to Duration

  Partnership with Fixed term

  Partnership at will
• As to Purpose

  Commercial or Trading

  Professional or Non Trading
• As to Legality of Existence

  De Jure Partnership

  De Facto Partnership
• Stages of a Partnership

  Formation

  Operation

  Dissolution

  Liquidation

  Incorporation
• Formation

  Commencement of the Partnership
• Operation

  Day to day operation, additional investments, withdrawal, sharing of Profit.
• Dissolution

  Any changes in ownership.
• Liquidation

  End of a partnership by liquidation.
• Incorporation

  End of partnership by converting into a corporation.
• Book Value

  Also known as carrying amount.

  Amount recorded in the books.
• Fair Value

  Amount that a buyer is willing to pay/ a seller is willing to accept.
• Rules on Initial Recognition

  Assets and Liabilities should be recorded at FV.

  If Fair Value is not given, use Book Value.

  EXCEPT: Prepaid Expenses (If no FV, use 0)

  EXCEPT: Goodwill (ALWAYS ZERO)