Partnership Agreement Template (Philippines)
A 2025 practitioner’s guide to everything you need to know—law, tax, SEC compliance, and a drafting blueprint.
1. Statutory & Regulatory Foundation
| Source of rules | Key take-aways |
|---|---|
| Civil Code of the Philippines, Title IX – Partnership (Arts. 1767-1867) | Defines a partnership, its juridical personality, mandatory form (public instrument + SEC recording if capital ≥ ₱3,000 or real property is contributed), types (universal/particular; general/limited), rights & obligations, and causes of dissolution. (Studocu) |
| Securities and Exchange Commission (SEC) | Registers partnerships; name-reservation rules; digital filing via eSPARC/OneSEC; Beneficial Ownership disclosure under SEC MC 23-2023; paperless filing under MC 18-2023. Partnerships still file four notarised hard copies but are exempt from online uploading. |
| National Internal Revenue Code (as amended by the CREATE Act, Ease of Paying Taxes Act 2024, etc.) | Treats most partnerships as corporations taxed at 25 % CIT (20 % for MSMEs); imposes a 10 % final tax on partners’ distributive shares; General Professional Partnerships (GPPs) are pass-through and pay no income tax. (ASEAN Briefing, Dentons, E-Library) |
| Local Government Code & SSS/PhilHealth/Pag-IBIG laws | Require Barangay Clearance, Mayor’s Permit, and employee coverages after SEC registration. (Yap Kung Ching & Associates Law) |
2. Choosing the Right Form
| Variant | When to use | Core features |
|---|---|---|
| General Partnership | Small ventures where all partners manage & are jointly/solidarily liable. | Unlimited liability; no minimum capital. |
| Limited Partnership | Ventures needing passive investors. | At least one general (unlimited) and one limited (liability capped to contribution) partner; must indicate “Limited” in the firm name. |
| General Professional Partnership (GPP) | Law, architecture, accounting, consultancy, etc. | Partners are licensed professionals; entity itself is income-tax-exempt; partners taxed individually. (Global Practice Guides) |
| Unregistered / Secret Partnerships | Discouraged—lose juridical personality and default to co-ownership. (Studocu) |
3. Essential Elements & Formalities
Parties – ≥ 2 natural or juridical persons with capacity.
Contribution – Money, property, or industry (services).
Lawful Purpose & Profit Intent – Must be licit and for mutual gain.
Form –
Public instrument (notarised) always when:
- Capital ≥ ₱3,000 or
- Real property is contributed (attach sworn inventory).
Record with the SEC to enjoy juridical personality against third persons. (Studocu)
4. SEC Registration Workflow (2025 edition)
| Step | What happens | Practical tip |
|---|---|---|
| 1 – Name reservation | Via eSPARC; check MC 13-2019 for naming rules (must include “& Co.” or “Partners”). | Reserve early—valid for 30 days. |
| 2 – Encode online | Fill out eSPARC form (six stages). | For partnerships, the system skips document upload; you will still submit four hard sets later. |
| 3 – Draft & notarise Articles of Partnership (AoP) | Use template in § 9 below. | Attach FIA-Form 105 if ≥ 40 % foreign equity. |
| 4 – Pay fees | Filing fee: 0.5 % of capital (min ₱2,000) + ₱1,000 legal research + name-reservation fee. | |
| 5 – Submit hard copies | Within 30 days of payment to chosen SEC office; claim Certificate of Registration. | |
| 6 – Post-SEC registrations | BIR Form 1903 (get TIN; book-of-accounts; OR printing); Barangay Clearance; Mayor’s Permit; SSS, PhilHealth, Pag-IBIG; DOLE if ≥ 5 employees. (Yap Kung Ching & Associates Law) |
5. Taxation Snapshot (as of FY 2025)
| Entity | Income tax | VAT / Percentage tax | Other key taxes |
|---|---|---|---|
| Taxable partnership | 25 % CIT (20 % if MSME); 2 % MCIT floor from 2023 | 12 % VAT if sales > ₱3 M; otherwise 3 % PT | 10 % final tax on partner dividends (ASEAN Briefing, KPMG) |
| GPP | Exempt; partners pay graduated or 8 % tax on their shares | Same VAT/PT rules as sole practitioners | Partners’ shares treated as professional income (E-Library, Global Practice Guides) |
| Joint venture for construction/energy | Exempt if accredited under special laws | Regular indirect taxes apply |
CREATE and the Ease of Paying Taxes Act re-categorise taxpayers by gross sales and streamline returns; check the latest BIR issuances when filing. (ASEAN Briefing)
6. Governance & Liability Highlights
- Management – By default, each partner may bind the firm; limit this via AoP (e.g., designate a Managing Partner).
- Contributions in industry – Industrial partners cannot engage in competing business.
- Solidary liability – Partners are solidarily liable with the partnership for torts (Arts. 1822-1824). (Studocu)
- Transfer of interest – A partner may assign his share in profits, but full substitution requires unanimous consent.
- Dissolution triggers – Term expiry, will of any partner, death/insolvency, illegality, court decree. AoP should provide a buy-out formula and winding-up mechanism.
7. Annual SEC & BIR Compliance
| Filing | Deadline |
|---|---|
| General Information Sheet (GIS) | 30 days from partnership’s anniversary date; now includes Beneficial Ownership declaration (MC 23-2023). |
| Audited Financial Statements | Within 120 days from fiscal year-end if gross sales or assets > ₱600 k. |
| BIR Annual ITR (Form 1702) | 15th day of 4th month following FY-end (taxable partnerships). GPPs file “information” return only. |
| Mayor’s Permit renewal | Every 20 January. |
Late filings incur hefty SEC fines (₱5,000 + ₱1,000/day) and may block dissolution requests.
8. Foreign Equity & Investment Restrictions
- Foreigners may be partners subject to the Foreign Investment Negative List (e.g., 40 % cap in retail trade outside “large-scale”).
- In limited partnerships, only limited partners may be foreigners if the business is partially nationalised; at least one general partner must be Filipino and resident.
- Capital > US$200,000 is normally required for a fully foreign-owned domestic market enterprise unless qualified as an export enterprise or SME.
9. Model Articles of Partnership (Skeleton)
Disclaimer – This template is for educational purposes only. Tailor each clause to your facts and seek Philippine counsel.
- Name – “ABC & Co., Limited”
- Principal Office – [Complete address]
- Term – [xx] years from SEC registration unless dissolved earlier.
- Purpose – “To [primary business]; and to do all acts necessary or incidental thereto.”
- Capital Contributions
| Partner | Type | Amount/Asset | % Interest |
|---|---|---|---|
| Juan Dela Cruz | Cash | ₱1,000,000 | 50 % |
| Maria Santos | Industrial (Marketing) | Appraised at ₱1,000,000 | 50 % |
Profit & Loss Sharing – Pro-rata to capital except industrial partner who receives [x %] of net profits but bears no losses.
Management & Voting
- Managing Partner: Juan Dela Cruz.
- Major decisions (capital calls, borrowing, admission of partners, dissolution) require unanimous consent.
Banking Arrangements – All cheques ≥ ₱100,000 require two signatures.
Non-Compete & Confidentiality – Partners shall not engage in any business similar to the partnership within [Philippines] during the term and two (2) years after withdrawal.
Admission / Withdrawal – New partners admitted by unanimous vote; withdrawing partner must give 60-days’ notice and offer interest to existing partners first (right of first refusal).
Capital Calls – Partners agree to contribute additional capital pro-rata upon 75 % vote when required by operations.
Dispute Resolution – Mediation in Makati; unresolved disputes to be finally settled by arbitration under PDRCI Rules.
Dissolution & Liquidation – Causes per Art. 1830; winding-up by Managing Partner; surplus distributed per Art. 1839 order.
Amendment – Written instrument signed by all partners and recorded with SEC.
Governing Law – Laws of the Republic of the Philippines.
Attach:
- Inventory of real properties (if any);
- Beneficial Ownership Declaration;
- Notarial Acknowledgment.
10. Drafting Tips & Common Pitfalls
| Pitfall | Prevention |
|---|---|
| Silence on exit valuation | Include clear buy-out formula (e.g., audited book value × x multiplier or independent appraisal). |
| Industrial partner contributes only “skill” | Quantify value for tax & percentage-ownership clarity. |
| Undefined dispute venue | Choose ADR to avoid slow courts; include enforcement clause. |
| Ignoring tax classification | State explicitly if entity is a GPP and list PRC licence numbers; file Form 1901 for VAT if services exceed ₱3 M. |
| No succession plan | Provide for heirs’ buy-out or assignment upon death. |
11. Dissolution Checklist
- Partner resolution + notarised Articles of Dissolution.
- SEC filing (Form DSLD) and clearance of outstanding penalties.
- BIR tax clearance and inventory liquidation return.
- LGU closure permit & Barangay/Mayor’s Certificate.
- Notice to creditors and publication (once a week for 3 weeks).
- Distribution of assets in this order: (a) external creditors, (b) partners’ advances, (c) capital, (d) surplus profits. (Studocu)
12. Alternatives to a Partnership
| Option | Why you might choose it instead |
|---|---|
| Sole Proprietorship | 100 % control; DTI registration; unlimited liability. |
| One Person Corporation (OPC) | Limited liability with single shareholder; higher compliance than partnership. |
| Stock Corporation | Better for scaling, outside funding, perpetual existence, and easier equity transfer. |
Closing caveat
This article integrates the latest statutes, SEC circulars, and BIR rules available as of 27 May 2025. Philippine regulations evolve quickly—verify citations and fee schedules, and engage qualified counsel before executing or relying on any partnership agreement.