Distinguishing Partnership from a

Corporation
Definition
Partnership - by the contract of partnership two or more persons bind
themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the profits among themselves. (Art. 1767, Civil
Code)
Corporation - 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. (Sec.2, Corporation Code

Differences
Manner of Creation
A partnership is created by mere agreement of the partners
while a corporation is created by operation of law.
Right of Succession
In a partnership, there is no right of succession; in a corporation,
there is a right of succession. A corporation has the capacity if
continued existence regardless of death, withdrawal, insolvency or
incapacity of its directors or stockholders.

Structure
Corporations and partnerships differ in their structures, with
corporations being more complex and including more people in the
decision-making process. A corporation is an independent legal entity
owned

by

shareholders

(5-15

persons/founders),

in

which

the

shareholders decide on how the company is run and who manages it. A
partnership is a business in which two or more individuals share
ownership. In general partnerships, all management duties, expenses,
liability and profits are shared between two or more owners. In limited

partnerships, general partners share ownership responsibilities and

limited partners serve only as investors.

Startup Costs
Corporations are more expensive and complicated to form than
partnerships. Forming a corporation includes a lot of administrative fees,
and complex tax and legal requirements. Corporations must file articles of
incorporation,

and

obtain

state

and

local

licenses

and

permits.

Corporations often hire lawyers for help with the process. It is advisable
that only established, large companies with multiple employees start
corporations. Partnerships are less costly and simpler to form. Partners
must register the business with the government and obtain local business
licenses and permits.

Liability
In partnerships, the general partners are held liable for all company
debts and legal responsibilities to the extent of their personal assets.
General

partners' assets

may

be

taken

to

pay

company debts.

Corporations, on the other hand, do not hold individuals liable for the
company's debt or legal obligations. The corporation is considered a
separate entity and therefore the corporation itself is responsible for
assuming all debts and legal fees, and the shareholders are liable only to
the extent of their interest or investment in the corporation so they are
not at risk of losing personal assets.
Commencement of Juridical Personality
In

partnership,

juridical

personality

commences

from

the

execution of the articles of partnership; in a corporation, from the

issuance of certificate of incorporation by the Securities and Exchange
Commission.

Management
Partnerships

have

simpler

management

structures

than

corporations. In a partnership, all general partners decide how the

company

is

run.

General

partners

often

assume

management

responsibilities or share in the decision of hiring and monitoring

managers. Corporations are governed by shareholders, who conduct
regular meetings to determine company management and policies. The
management is vested on the Board of Directors.

 Summary
Corporation

Partnership

Definition

A legal entity which is

separate from its owners.

A business entity with

individuals who share the
risk and benefits of
business.

Ownership

Stockholders

Partners

Formed

Formed under
operational laws with
Articles of Incorporation.

An agreement among the

members.

Types

subchapter-s corporation,
professional corporation

general partnership,
limited partnership,
limited liability
partnerships

Management

Run by a board of directors

Run by the partners

Structure

Members of a corporation
have to act in accordance
with the corporation's
charter. More structured,
less flexible. Easier to
transfer ownership of part
of a corporation.

Partnerships have to
adhere to a partnership
agreement. More flexible,
less structured. Each part
of the business has to be
individually transferred or
sold.

Raising money

By sale of financial
instruments like stocks and
bonds.

From current members,

getting new members, a
loan

Liability

The stockholders are not

held responsible in case of
a fault, the corporation is.

The partners share the

liability, and are directly
responsible in case of
fault.

Dissolution

Stockholder approval,
government approval

Decision of the partners