Business entity formed by two or more persons who contribute money, property, or industry to a common fund with the intention of dividing profits. Registered with SEC.
A partnership is formed when two or more persons agree to pool resources and share in the profits and losses of a business. In the Philippines, partnerships with a capital of ₱3,000 or more must be registered with the SEC. Partnerships are taxed as corporations for income tax purposes — filing BIR Form 1702 and subject to the 25% corporate income tax rate on taxable income.
There are two types: General Partnership, where all partners have unlimited liability (similar to sole proprietorship but shared among partners); and Limited Partnership, where limited partners contribute capital but are not personally liable beyond their investment, while at least one general partner retains unlimited liability.
In practice: Sisters Ana and Maria Reyes pool ₱500,000 each to open "Sisters Catering Co." as a general partnership registered with the SEC. They split all profits 50-50. If the business incurs debts beyond its assets, both Ana and Maria are personally liable from their personal savings — because they are general partners. A limited partnership structure would protect a purely capital-contributing partner.
Why it matters: Partnerships offer the flexibility of shared management and pooled resources without the formality of a corporation — but they carry the risk of joint and several liability (creditors can go after any one partner for the full debt). The choice between general partnership and limited partnership should be made with legal and accounting advice, especially regarding liability exposure.
Note: Professional partnerships (law firms, accounting firms, medical groups) have special tax treatment — partners receive their share of partnership income and pay individual income tax on it, not just the corporate rate.