The Risks and Realities of Business Partnerships in the Philippines (With Free SEC Format Template)
Wait! Stop right there. Are you seriously thinking of starting a business with a friend or family member? Like really, really, really serious?
Partnership sounds cool: “We’ll put our money together, share the work, and split the profits.” Simple, right?
Not really. Before you dive right into partnership, you might want to read these realities first, otherwise if you’ve really made up your mind, scroll to the end to get the Free Sample Articles of Partnership:
But, can I change your mind first?
Why Partnerships Often Fail
Common Issues Between Partners
- One partner contributes more money while the other contributes skills.
- One works full-time, the other stays “chill.”
- Different management styles = constant conflict.
Legal Risks
- In a general partnership, all partners are personally liable.
- If your partner borrows money in the business’s name, creditors can go after your personal assets, even if you didn’t sign the loan.
How to Register a Partnership with the SEC
Basic Requirements
- Name Verification Slip from SEC
- Articles of Partnership (signed & notarized)
- For partnerships with foreign equity: proof that Filipino ownership stays above the required percentage
- Filing fees (based on capital contribution)
What Goes Inside the Articles of Partnership
- Business purpose
- Capital contribution (cash, property, or industry/skills)
- Profit and loss sharing (usually pro-rata unless agreed otherwise)
- Management roles
- Restrictions on transfer of interest (to protect Filipino ownership %)
- Name change obligation (SEC can force name changes if confusing/misleading)
- Term of the partnership
Be as detailed as possible especially on Management Roles & Profit and loss sharing because this will determine whether you will still have a good relationship with your business partner when things get hard 😂.
Why Some People Still Choose Partnerships
- Lower startup costs – no minimum capital required
- Easier to start – less formality than corporations
- Only two people needed – not five incorporators like traditional corporations
- Flexibility – fits small ventures
But long term, many lawyers and accountants still recommend incorporating to protect personal assets.
Alternatives to Partnerships
- Sole Proprietorship / One Person Corporation (OPC) – best if you want full control
- Corporation – better if you already have two or more partners, since liabilities stay with the corporation
Final Thoughts
A partnership can work, but only if both parties are crystal clear on:
- Who contributes what (cash, property, or skills)
- How profits/losses are shared
- Who makes management decisions
- What happens if the partnership ends
Everything must be in writing — through a proper Articles of Partnership.
Click here to take you to Google Docs for a sample Articles of Partnership.
To use, make a copy and edit. Best of luck!
