LP Registration in Ontario (Canada) - Business Starting & Setup

The legal system of Canada is English common law for all matters within federal jurisdiction and in all provinces and territories except Quebec, which is based on the civil law, based on the Custom of Paris in pre-revolutionary France as set out in the Civil Code of Quebec.

In Ontario, the legal system is based on English common law.

The principal forms of business organization in Ontario are:

• Sole Proprietorship;
• General Partnership;
• Limited Partnership;
• Corporation;
• Not-for-profit Corporation;
• Extraprovincial Corporation;
• Branch Office.

For offshore purposes, the most common structures in Ontario are the extra-provincial corporation and limited partnership.

Limited Partnership is a special type of partnership that consists of at least one general partner and one or more limited partners. Note that a partner can be both a general and a limited partner. As such, a minimum of one person is needed for the registration of a Limited Partnership.

Limited partnership is not incorporated. A limited partnership is not a separate entity and is not a person legally distinct from its partners under Canadian law. Generally speaking, subject to the Limited Partnerships Act, general partners have unlimited liability, while limited partners have limited liability up to the amount that they contribute or agree to contribute to the limited partnership. Filing a Declaration, Form 3, with the Registrar under the Limited Partnerships Act forms a limited partnership.

An Ontario limited partnership is often used by:

• Regular trading companies for conducting business in Canada, US, EU and other highly regulated jurisdictions.
• An Agent working under the Sales Agency Agreement. The Principal may be any legal entity including companies registered in low and zero tax jurisdictions, e.g. the British Virgin Islands.
• Software development and IT support services, when major customers are located in Canada, US and EU.
• Online based businesses (website development, marketing services, auctions, web stores, etc.).

Limited Liability Partnerships must register the firm name and can carry on business in Ontario only under the registered firm name.

LLP name must be distinct from the names of all other limited partnerships in Ontario.

The words “limited liability partnership” or “société à responsabilité limitée” or the abbreviations “LLP”, “L.L.P.” or “s.r.l.” must appear in the name of a limited liability partnership.

The surname or a distinctive part of the corporate name of a limited partner shall not appear in the firm name of the limited partnership unless it is also the surname or a distinctive part of the corporate name of one of the general partners.

To incorporate a limited partnership in Ontario, the following steps are required:

1. Conduct preliminary name search.
2. Arrange for simple Limited Partnership Agreement to be prepared.
3. Complete Form 3 Limited Partnership Declaration to be prepared and executed (2 originally-signed copies).
4. Attend to the filing of the Form 3 Declaration with the Ontario Ministry of Government Service.

LLP registry fee is CAD 210.00.

It takes one day to register a limited partnership in Ontario.

Each LLP in Ontario must have a principal place of business in Ontario.

The general partners of every limited partnership shall maintain a current record of the limited partners stating, for each limited partner, the prescribed information. The record of limited partners shall be kept at the limited partnership’s principal place of business in Ontario. Upon request and without charge, any general partner must permit any person to inspect the record of limited partners during the normal business hours of the limited partnership and to make copies or take extracts from them. The Registrar may at any time by written notice require any general partner to provide to the Registrar or any other person a copy of the record of limited partners.

A limited partnership is not required to have a seal.

A limited partnership in Ontario should at least have one general partner. A general partner can be a resident of any country. Corporate general partners are permitted. If the corporate partner is incorporated outside Canada, an Ontario extra-provincial license is required to be obtained before the Ontario limited partnership can be registered. Information about general partners is publicly accessible.

A limited partnership in Ontario should at least have one limited partner. A limited partner can be a resident of any country. Corporate limited partners are permitted. Information on limited partners is not reported or filed on the public records.

A partner may be both a general partner and a limited partner; however, if an individual is both a general partner and a limited partner, the partner could lose his/ her limited liability status. Notwithstanding this, however, if the partner is a holding corporation (i.e. with no assets) then the limited liability status is afforded in any case.

The general partner(s) manages the business of the Limited Partnership, unless the Limited Partnership Agreement allows the general partner(s) to appoint a Manager.

No minimum or maximum contribution required. Type of contribution is cash and other property, but not services.

A general partner’s retirement, death or incapacity to manage property within the meaning of the Substitute Decisions Act, 1992 or a corporate general partner’s dissolution dissolves a limited partnership unless the business is continued by the remaining general partners,

• pursuant to a right to do so contained in the partnership agreement; and
• with the consent of all the remaining partners.

A declaration of dissolution shall be filed with the Registrar when the limited partnership is dissolved; or all of the limited partners cease to be limited partners. The declaration of dissolution shall be signed by at least one of the general partners. When the declaration of dissolution is filed, the declaration of LLP is cancelled.

In settling accounts after the dissolution of a limited partnership, the liabilities of the limited partnership to creditors, except to limited partners on account of their contributions and to general partners, shall be paid first, and then, unless the partnership agreement or a subsequent agreement provides otherwise, shall be paid in the following order:

1. To limited partners in respect of their share of the profits and other compensation by way of income on account of their contributions.
2. To limited partners in respect of their contributions.
3. To general partners other than for capital and profits.
4. To general partners in respect of profits.
5. To general partners in respect of capital.