Business Law Week 1

The Law on Business
Organizations
Concept of Business Organization
Concept of Business Organization
A business organization refers to a

group of individuals systematically
united for the accomplishment of a
common purpose or undertaking for
profit in any of the several ways
allowed and regulated by law.
Forms of Business Organization
Sole Proprietorship arises when a

business is owned by a single
individual
Partnership is a voluntary association

of two or more persons binding
themselves together to contribute
money, property or industry for the
purpose of dividing the profits among
themselves.
Corporation, where several persons

combine their capital investments in a
certificate of incorporation to enable
them to act as a legal unit.
Part 1: Partnership
Elements to constitute a partnership:
A. An intent to form the same

B. Generally participating in both profits
and losses
C. Such a community of interest, as far
as third persons are concerned as
enables each party to make a
contract, manage the business, and
dispose of the whole property.
Meaning of delectus personae
This is meant that a person has the

right to select persons with whom he
wants to be associated in partnership.
Corporations as partners
SEC has allowed corporations to

enter into partnerships, provided
the following conditions have been
imposed:
1. That all the corporation-
partners must be managing
partners
2. That their charters must
expressly allow the corporations
to enter into partnerships.
Meaning of Industry
This includes all human faculties

susceptible of useful application,
whether intellectual, moral, or
physical.
Meaning of Partnership Capital
or property may consist not only of

actual cash, lands, or goods, but
may also include the rendition of
personal services, the use of
property owned by one or more of
the partners.
Basic Features of a Business
Partnership:
1. Voluntary agreement
2. An association for profit
3. Contribution to a common fund
4. Lawful purpose
5. Mutual agency of partners
Basic Features of a Business
Partnership:
6. Articles must not be kept secret

7. Separate juridical personality
Characteristics of a partnership
contract:
1. It is consensual as it is
perfected by mere consent
2. It is bilateral as it is formed by
two or more persons creating
reciprocal rights and obligations
3. Preparatory
4. Nominate
5. Onerous
Partnership Hazards
1. The financial capacity of each one of the partners.

2. The integrity and reputation of the prospective
partners
3. The health and even the age of the prospective
partners must be considered.
4. The character, disposition and ability of a partner to
get along with people and those dealing with the
partnership.
Partnership Hazards
5. The experience, ability and training of a would-be

partner must be taken into account.
Art. 1768: The partnership has a juridical
personality separate and distinct from that
of each of the partners, even in case of
failure to comply with the requirements of
Article 1772
Partnership has juridical
personality. A partnership duly
formed under the law acquires a
separate juridical personality
distinct from that of the partners.
Types of Partnerships
General Partnership (GP)
A general partnership is a
business arrangement by which
two or more individuals agree to
share in all assets, profits and
financial and legal liabilities of a
jointly-owned business structure.
A Limited Partnership is
a partnership consisting of a
general partner, who manages the
business and has unlimited personal
liability for the debts and obligations
of the Limited Partnership, and
a limited partner, who
has limited liability but cannot
participate in management.
Limited Liability Partnership (LLP) is
a partnership in which some or all
partners (depending on the jurisdiction)
have limited liabilities. It therefore can
exhibit elements of partnerships and
corporations. In an LLP, each partner is
not responsible or liable for
another partner's misconduct or
negligence.
Activity 1
Answer the following questions:
1. No one becomes a member of the

partnership without the consent of all the
members. This is based on the principle
of:
Activity 1
2. What is Juridical Personality?

Activity 1
3. Why is a partnership contract onerous?

Activity 1
4. This government agency allows the

corporations enter a partnership.
Activity 1
4. This government agency allows the

corporations enter a partnership.
Activity 1
5. What are the reasons why partnership is

hazardous?
Kinds of Partners
Kinds of Partners
1. General Partner. A general partner is a

member of a general or limited
partnership who is responsible to third
persons with his separate property for his
pro rata share of the partnership
obligations after the partnership assets
and exhausted.
Kinds of Partners
2. Limited Partner. A limited partner is a

member in a limited partnership who is
not liable to third persons with his
separate property for partnership
obligations notwithstanding the
exhaustion of the partnership assets.
Kinds of Partners
3. Capitalist Partner. A capitalist partner is

a general or limited partner who
contributes money or property to the
common fund of the partnership
Kinds of Partners
4. Industrial Partner. An industrial partner

is actually a general partner whose
contribution to the common fund of the
partnership is his industry or services,
becomes the common property of all the
partners, as well as all the profits which
they may acquire therewith.
ART. 1777. A universal partnership may
refer to all the present property or to all
the profits.
ART. 1778. A partnership of all present
property is that in which the partners
contribute all the property which actually
belongs to them to a common fund, with
the intention of dividing the same among
themselves, as well as all the profits which
they may acquire therewith.
ART. 1779. In a universal partnership of
all present property, the property which
belonged to each of the partners at the
time of the constitution of the
partnership, becomes the common
property of all the partners, as well as the
profits of which they may acquire
therewith.
ART. 1780. A universal partnership of
profits comprises all that the partners may
acquire by their industry or work during
the existence of the partnership.
Movable or immovable property which

each of the partners may posses at the
time of the celebration of the contract
shall continue to pertain exclusively to
each, only the usufruct passing to the
partnership.
ART. 1781. Articles of universal
partnership, entered into without
specification of its nature, only constitute
a universal partnership of profits.
ART. 1782. Persons who are prohibited
from giving each other any donation or
advantage cannot enter into universal
partnership.

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Business Law Week 1

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The Law on Business

A business organization refers to a

Sole Proprietorship arises when a

Partnership is a voluntary association

Corporation, where several persons

A. An intent to form the same

This is meant that a person has the

SEC has allowed corporations to

This includes all human faculties

or property may consist not only of

6. Articles must not be kept secret

1. The financial capacity of each one of the partners.

5. The experience, ability and training of a would-be

Answer the following questions:

1. No one becomes a member of the

Answer the following questions:

2. What is Juridical Personality?

Answer the following questions:

3. Why is a partnership contract onerous?

Answer the following questions:

4. This government agency allows the

Answer the following questions:

4. This government agency allows the

Answer the following questions:

5. What are the reasons why partnership is

1. General Partner. A general partner is a

2. Limited Partner. A limited partner is a

3. Capitalist Partner. A capitalist partner is

4. Industrial Partner. An industrial partner

Movable or immovable property which

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