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Partnership
Careful planning with a Chartered Accountant is warranted. Contact Keith Anderson CA at (780) 447-5830 if you need advice.
Click HERE for more information on Partnerships and Taxation.
A
partnership is an agreement in which two or more
entities such as individuals or corporations combine their resources in a
business with a view to making a profit. In order to establish the terms of the
partnership and to protect partners in the event of a disagreement or
dissolution of a partnership, a partnership agreement should be written up.
Consultation of a lawyer is advised. Standard form partnership agreements can be
purchased at stationary stores. It
is advisable to have a notarized agreement drawn up to form the partnership,
specifying all terms and conditions, including amounts of investment and sharing
of profits.
All partnerships must be registered under the name of the business, and may also register another trade name, or trade names, for use.
The partners are generally jointly and severally liable for the partnership’s obligations and debts. This means that one partner can be held responsible for all debts, obligations, wrongful acts or omissions committed by other partners acting in the ordinary course of the partnership's business. Each partner is obligated to pay income tax for its share of the income, net of expenses, earned by a partnership in a taxation year. The business operations may continue after the death of one partner, if the agreement specifies the manner in which this is to occur. However, the result will be the formation of a new partnership, subject to a new registration.
There are two types of partnership, a general partnership and a limited partnership. In a General Partnership, two or more partners share the management of a business, and each is personally liable for all the debts and obligations of the business. This means that each partner is responsible for, and must assume the consequences of the actions of the other partners. A Limited Partnership involves partners who combine only capital. Limited partners are not involved in managing the business and cannot be liable for more than the amount of capital they have contributed. A limited partnership also involves general partners, who are involved in management. They are fully liable for the debts and obligations of the business, but may be entitled to a greater share of the profits.
Partnerships are regulated by the provincial government. Contact the applicable provincial registrar for registration requirements. Third parties often require registration for use of a trading name. Examples include opening a bank account, registering a motor vehicle, opening a day care and bidding on some government contracts.
Advantages:
Disadvantages:
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