Short answer. Not automatically, but it counts against you. Article 1769 of the Civil Code treats receiving a share of profits as prima facie evidence of a partnership, unless the payment was actually a debt installment, wages, rent, an annuity, loan interest, or payment for a business's goodwill — in which case no partnership is inferred from it.
What the law says
The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: (a) As a debt by installments or otherwise; (b) As wages of an employee or rent to a landlord; (c) As an annuity to a widow or representative of a deceased partner; (d) As interest on a loan, though the amount of payment vary with the profits of the business; (e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.
Civil Code, Article 1769 — Rules to Determine Existence of a Partnership. Read the full provision →
Sharing profits is evidence, not proof by itself
Article 1769 states that the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. Prima facie evidence means it counts as a starting point that supports a finding of partnership, not that a partnership is automatically and conclusively established the moment profits are shared. It can be outweighed by other facts showing the true nature of the arrangement — which is exactly what the rest of the article addresses.
Five situations where the inference does not apply
The article lists specific payments where no such inference shall be drawn even though they vary with profits: payment as a debt by installments, as wages of an employee or rent to a landlord, as an annuity to a widow or representative of a deceased partner, as interest on a loan, though the amount of payment vary with the profits of the business, and as the consideration for the sale of a goodwill of a business or other property by installments or otherwise. If your arrangement fits one of these categories, the profit-sharing itself does not point toward a partnership.
Two things that do not by themselves create a partnership
The article also rules out two other common assumptions. It states that except as provided by article 1825, persons who are not partners as to each other are not partners as to third persons, and that co-ownership or co-possession does not of itself establish a partnership, whether or not the co-owners share profits from using the property. Owning something jointly, or being treated as partners by an outsider, is not the same as actually being partners between yourselves.
What actually decides the question
Because the profit-sharing inference is rebuttable, what matters is the real character of the payment and the relationship behind it — whether it was truly wages, rent, loan interest, or a debt payment, versus a genuine share of business profits given because you were treated as a co-owner of the venture. Article 1825 adds a separate route to liability: someone who represents themselves, or lets themselves be represented, as a partner can become answerable to people who relied on that representation, whether or not an actual partnership exists between the parties.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Pedro D. Dusol and Maricel M. Dusol vs. Emmarck A. Laso, as owner of, G.R. No. 200555, January 20, 2021 — read the decision on LawPhil →
- Federico Jarantilla, Jr. vs. Antonieta Jarantilla, et al, G.R. No. 154486, December 1, 2010 — read the decision on LawPhil →
- Heirs of Jose Lim, represented by Elenito Lim vs. Juliet Villa Lim, G.R. No. 172690, March 3, 2010 — read the decision on LawPhil →
- Heirs of Tan Eng Kee vs. Court of Appeals, G.R. No. 126881, October 3, 2000 — read the decision on LawPhil →