We're glad you're interested in creating a Limited Partnership. Starting a business is exciting, but figuring out what kind of legal set up you need can feel overwhelming. That's why we made the Start-a-Business Assistant.

A Corporation could work great for you.

• Limited liability: As an owner or investor of the Corporation, you get shares that represent how much of the company you own and you're called a shareholder. The great thing about a Corporation is that the shareholders are not liable for the Corporation's debts and obligations. That's a huge plus since it allows you to run a business without putting your own personal money and assets at risk. It's also the biggest reason why Corporations are used so much.
• Taxes: The law and tax rules see a Corporation as a separate legal person, so it has to pay taxes like the rest of us. So do the shareholders on what they take as income from the Corporation. This is the so-called "double taxation" problem. But that doesn't mean a Corporation is all bad for taxes. There are some ways Corporations can help you save on taxes through business expenses deductions.
• Shareholders can play an active role in the company's management and operations: The shareholders can make business decisions, have management roles, and generally be quite active in the Corporation's operations if they want to, all without losing their limited liability protection.
• Easy to transfer ownership: You can easily bring investors into the Corporation, or sell the whole or part of your business.
• Keep personal and business separate: A Corporation is separate from its owners (i.e. you), so the business can borrow money, raise money, and enter into contracts on its own.
• Include a Unanimous Shareholder Agreement: If you have business partners and investors, you can make a Unanimous Shareholder Agreement. It’s a rule book that covers how you'll vote on major business decisions, who gets new shares, how someone can sell their shares, and what happens when you want to sell the business (and more).

A general partnership could be suited to what you need right now.

• Great for saving on taxes: General Partnerships are not taxed, which can make them a great tool for structuring your business. It's also the main reason why you might choose a General Partnership over a Corporation, which is taxed. The profits flow through the partnership, without being taxed, and on to the partners, who do get taxed.
• No protection from liability: a General Partnership does not protect the partners from liability. You may have heard that shareholders in a Corporation are not responsible for the debts and obligations of the company. That's true. But, it's not true for the partners in a General Partnership - they are liable in full for all the debts and obligations of the partnership.
• Meant for businesses to work together in a tax efficient way: So why use a General Partnership? They're meant for two (or more) businesses to come together and partner on a project or new business idea. Since the businesses are okay with the risk of the new project, they don't create a whole new Corporation for it. Instead, they accept the risk of being liable for the debts and obligations of the project and in exchange, they get the benefit of not being taxed for the project as a separate company. The General Partnership Agreement the business partners come up with will outline how they will work together.
• Why would you be okay with the risk of being liable? We don't mean to get too technical on you, this isn't meant to be a law school course after all! But here's the thing - a General Partnership isn't really a new business. It isn't a separate company or legal entity. Instead, it's two or businesses coming together to work on something. So, because they are existing businesses, the partners are usually already set up as Corporations. In fact, it would be a bad idea (in almost every case) to not have a Corporation set up if you're going to be in a General Partnership. Since the existing businesses coming together in the General Partnership are Corporations, their owners (meaning, the shareholders of the Corporations) are protected from liability. So, they're okay with the risk and instead want the tax benefits of being in a General Partnership.
• So, how is a General Partnership typically set up? Usually, you have two or more Corporations set up for each business partner. The Corporations are more commonly the existing businesses of the partners that have been running for a while. Less common (but still normal though) is to set up new Corporations for each of the partners. Then you make a General Partnership Agreement to set up your working relationship. From there, you start working. Be sure to get your accountant involved in the tax planning.

A Limited Partnership could work for you.

• Great for saving on taxes: Limited Partnerships are not taxed, which can make them a great tool for structuring your business. It's also the main reason why you might choose a Limited Partnership over a Corporation, which is taxed. The profits flow through the partnership, without being taxed, and on to the partners, who do get taxed.
• Limited liability for the Limited Partners, sort of...: The Limited Partners are only liable for the debts and obligations of the partnership up to the amount of their investment. So if you put in $10,000 into the partnership as a Limited Partner, that's the maximum liability you have unless...
• Limited Partners can lose their limited liability: ...If the Limited Partners take an active role in the operation and management of the partnership, they will lose their limited liability protection and can be fully responsible for the debts and obligations of the partnership. Tip: it's a good idea to have the Limited Partners be Corporations to give you extra protection.
• The General Partner is in charge and liable for the partnership's debts and obligations: You'll need at least one General Partner, and that's the partner who is in charge of managing the business and operations of the partnership. Since it takes on that role, the General Partner is also the one liable for the debts and obligations of the partnership. Tip: because of this, it's best to make the General Partner a Corporation to give you more protection.
• Meant for a passive investment style: All of this means that Limited Partnerships are better suited for a passive investment style. They're intended to be a way for others to invest in the business and earn a return on their investment, but without taking an active part in the business. Instead, the General Partner is left to make the business decisions and manage the operations.

Limited Partnerships are made up of Limited Partners and at least one General Partner. The Limited Partners are called "limited" because they are not fully liable for the debts and obligations of the partnership. In other words, they have limited liability. But that limited liability is not perfect - there is a big exception.

The Limited Partners are only protected from liability if they are not taking an active role in the operations of the partnership. If they do, they become fully liable for the partnership's obligations and debts.

The General Partner is the one in charge of managing the business and operations of the partnership. Since it takes on that role, the General Partner is also the one liable for the debts and obligations of the partnership.

All of this means that Limited Partnerships are better suited for a passive investment style with investors coming in as Limited Partners and providing money and resources to earn a return on investment, and the General Partner being the one making the business decisions and managing the operations.

Since your other partners/investors will be, or want to be, actively involved in the business, a Limited Partnership doesn't sound like a good match for you.

You could go into business as just you. We call that being a "Sole Proprietor". But, it isn't typically recommended.

• You're fully liable, so be careful: As a Sole Proprietor, you're in business as well, "you". There's no difference, as the law sees it, between your business and you. So anything that your business is sued for becomes your personal liability. That's why it's hard to recommend a Sole Proprietorship as a business structure. It's usually better to go with a Corporation.
• Taxes: The benefit of being a Sole Proprietor is that you and your business are the same when it comes to taxes. Unlike a Corporation, which is taxed on its own, your business is not taxed separately because you are the business. But, it also means that you may not get the full range of tax deductions and favourable tax rates that you may get through a Corporation. That's something to figure out with your accountant. From the legal side of the decision equation though, we would say you should think about a Corporation so you're not liable for your business risk.

Great, let's make your Limited Limited Partnership Agreement. Tell us about the partners.

We'll keep going with some basics and build up from there.

We'll go over some points about your General Partner now.

Tell us how you would like to calculate the General Partner's annual fee.

Let's go over some points about your Limited Partners now.

We'll go over some financial matters now.

Partners can also loan money to the partnership, which gets repaid over time as the partnership makes a profit. Will any of the partners be loaning money when you sign your Limited Partnership Agreement?

Let's go over some confidentiality and non-competition points now.

What protections do you want to have for the partnership? Check all that apply.

What would a business be without meetings?

Let's go over how we change your Limited Partnership Agreement.

Let's talk about transferring your ownership in the partnership to others.

Here's what else we recommend for you.

Set up a Corporation to be your General Partner. Since the General Partner has unlimited liability for the partnership's business, it's always a good idea to have your General Partner be a corporation rather than a real person. Since you haven't gotten around to setting up a corporation for your General Partner yet, we would be happy to help you with it. Here's a link to where you can set up a corporation with us (opens in a new tab, you won't lose your spot).

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