Partnership Agreement (Philippines)

A Partnership Agreement in the Philippines governs the joint enterprise, fixing the parties' respective stakes, duties and exit rights.

1767-1867.

Philippine law recognizes three forms of partnership relevant to business practice. A general partnership is one where all partners are liable jointly and severally for all partnership obligations, pursuant to Article 1816 of the Civil Code. A limited partnership is one where at least one general partner bears unlimited liability for partnership debts and one or more limited partners whose liability is limited to their capital contributions, under Articles 1843 to 1867 of the Civil Code and as registered with the SEC using SEC Form LS-GP or LS-LP. A general professional partnership (GPP) is formed by professionals for the exercise of a common profession — licensed under the Professional Regulation Commission (PRC) — and is exempt from income tax under Section 22(B) of the National Internal Revenue Code (NIRC, RA 8424), as the partners are taxed individually on their respective shares of net income.

The Bureau of Internal Revenue (BIR) treats partnerships as taxable entities subject to income tax at 25% under the CREATE Act (RA 11534, 2021) on net taxable income, with partner distributions subject to Final Withholding Tax of 10% under Section 24(B)(2) of the NIRC. The SEC's Revised Guidelines on the Registration of Partnerships under SEC Memorandum Circular No. 14, Series of 2019 require partnerships with capital contributions of PHP 3,000 or more to register within 30 days of execution of the partnership agreement.

The legal framework governing the Partnership Agreement (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Partnership Agreement (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Civil Code of the Philippines (RA 386), Art. 1767-1867 sets the foundational requirements.

A Partnership Agreement is needed in the Philippines in specific circumstances when two or more persons wish to conduct business jointly under the partnership structure.

A Partnership Agreement is required when licensed professionals — lawyers, accountants, engineers, or architects licensed by the PRC under their respective Professional Regulation Acts — wish to form a General Professional Partnership (GPP) to practice their profession jointly. Law firms organized as GPPs are exempt from corporate income tax under Section 22(B) of the NIRC, and the BIR requires a Partnership Agreement and SEC registration certificate as part of GPP tax registration.

A Partnership Agreement is needed when two or more persons wish to establish a trading, retail, or service business without the formalities of incorporation. Partnerships with capital of PHP 3,000 or more must register with the SEC under Article 1772 of the Civil Code, and a written Partnership Agreement is the primary document for SEC registration.

A Partnership Agreement is required for limited partnerships used in private equity and real estate investment structures. A limited partnership allows investor partners (limited partners) to contribute capital with capped liability while an experienced general partner manages the business, useful for real estate development companies and investment holding structures.

A Partnership Agreement is needed when two or more family members wish to pool capital for a family business while retaining the flexibility of partnership governance — rather than the more formal corporate governance requirements under RA 11232 — for businesses below the threshold requiring mandatory audit under SEC regulations.

A Partnership Agreement is required when foreign investors wish to enter a partnership with Filipino nationals in sectors open to foreign partnership under the Foreign Investments Act (RA 7042) and the Foreign Investments Negative List under Executive Order 175 (2022).

A complete Philippine Partnership Agreement under the Civil Code (RA 386) must contain the following essential elements.

Partnership Name: The agreed name of the partnership, which must not be identical or deceptively similar to any registered business name or corporation name in the SEC's database. For limited partnerships, the name must include the word 'Limited' or the abbreviation 'Ltd.' under Article 1844 of the Civil Code.

Purpose and Principal Office: The specific business purpose of the partnership and the address of its principal office in the Philippines, which determines the Revenue District Office (RDO) of the Bureau of Internal Revenue (BIR) for tax registration under the NIRC.

Partners and Capital Contributions: Full names, nationalities, addresses, and Tax Identification Numbers (TINs) of all partners. Each partner's capital contribution — whether cash, property, or industry (services) — and the agreed valuation of non-cash contributions.

Profit and Loss Sharing: The agreed ratio for distributing profits and absorbing losses among the partners. Under Article 1797 of the Civil Code, if the partners have not agreed on profit sharing, profits and losses are distributed in proportion to each partner's capital contribution. A partner who contributes industry only (no capital) shares in profits equally with the partner having the smallest capital contribution.

Management Rights: The designation of managing partners, their authority to bind the partnership in contracts, incur obligations, and deal with third parties. Under Article 1800 of the Civil Code, a partner appointed as manager may perform all acts of administration unless the other partners expressly oppose.

Liability: For general partnerships, the joint and several liability of all partners under Article 1816. For limited partnerships, the distinction between general partners (unlimited liability) and limited partners (liability limited to capital contribution) under Articles 1843 to 1867.

Duration: The agreed term of the partnership or, if no term is set, the partnership is at will under Article 1830 of the Civil Code. Events causing dissolution, including death, incapacity, or withdrawal of a partner, must be addressed.

SEC Registration: The Agreement must be in a public instrument (notarized) under Article 1772 and registered with the SEC within 30 days of execution under SEC Memorandum Circular No. 14, Series of 2019 for partnerships with capital of PHP 3,000 or more.

Additional compliance elements for a Partnership Agreement (Philippines) used in Philippines include: Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.