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Comparison and Contrast of Partnership and Corporations

Ballada defined Partnership as a contract between two or more people that binds themselves to
contribute money, property or industry to a common fund; and Corporation as an artificial being
created by operation of law, having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence. Although both are business
organizations that are formed by a number of people, they are very different in numerous ways.
Manner of Creation. A partnership can be formed and created by a mere agreement of two or
more persons, even verbally. On the other hand, corporation is created through operation of law.
For it to be formed, a partnership and a corporation must be registered at Securities and
Exchange Commission. Although if a partnership is not registered, it is still valid and therefore
has legal personality.
Number of Persons. A partnership can be formed by two or more persons. It can even have
more than a hundred partners. (e.g. SGV Accounting Firm) While a corporation, must have a
number of directors and trustees, which shall not be less than five nor more than fifteen.
Commencement of Juridical Personality. In a partnership, juridical personality commences
from the execution of the articles of a partnership, a contract where partnership agreements are
embodied; in a corporation, it is from the issuance of certificate of incorporation by the
Securities and Exchange Commission.
Startup Costs. Partnerships are less costly and simpler to form. And compared to Corporation,
it is more personal and informal. Corporations, on the other hand, are more expensive and
complicated to form than partnerships. It requires filing articles of incorporation, and obtain
national and local licenses and permits.
Management. In a partnership, every partner is an agent of the partnership if the partners did
not appoint a managing partner; whereas in a corporation, management is vested upon the
Board of Directors/Trustees. And shareholders whos share ratio qualified to be called
associate are the ones who can influence management.

Extent of Liability. In a partnership, each of the partners, except a limited partner, is liable for
all debts incurred by the partnership. If the partnership cannot settle its obligation, creditors may
claim the personal assets of the partners without prejudice to the right of a separate creditors of
the partners. in a corporation, stockholders are liable only to the extent of their interest or
investment in the corporation.
Right of Succession. In a partnership, there is no right of succession; while in a corporation,
there is right of succession. A corporation has the capacity of continued existence regardless of
death, withdrawal, insolvency or incapacity of its directors or stockholders.
Terms of Existence. A partnership can exist for any period of time stipulated by the partners on
the articles of partnership. Whereas a corporation can exist up to fifty years and is subject to
extension.
Taxation. A partnership and a corporation is generally subject to 30% tax rate of Normal
Corporate Income Tax. Their distribution of profit to their partners, for partnership, and
shareholders, for corporations, are subject to final tax of 15%. Except a general professional
partnership that is not taxable and whos partners are subject to Schedular Income Tax.

Conclusion: Partnerships and Corporations are alike in a sense that they are both business
organizations who are formed and managed by a number of people. Having said that, the
similarities between these two usually end there. Since partners in a partnership usually face
distinct issues than that of the board members and shareholders of a corporation faces.

Reference:
Ballada, W. (2015). Partnership and Corporation Accounting: Made Easy. Sampaloc,
Manila: DomDane Publishers

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